The UAE Ministry of Finance has unveiled the penalty structure for non-compliance with corporate tax regulations, set to take effect on August 1, 2023. However, UAE businesses have been granted a nine-month grace period to ensure their tax submissions are accurate. The window aligns with each company’s financial year, providing ample time for compliance. For example, if a company’s financial year runs from January 1 to December 31, it will have until September of the following year to file its tax returns.
The specific penalties for violations have not been disclosed yet, but tax experts expect them to be in line with other tax regimes, such as VAT. According to sources, penalties could range from Dh1,000 to Dh2,000 or 2-4% of the tax dues.
Pankaj S. Jain, Managing Director at AskPankaj, a tax consultancy, lauded the UAE’s generous 9-month window for tax filing, which exceeds the average time given by most tax jurisdictions.
To assist companies with corporate tax registration, AskPankaj and ‘Gulf News’ are offering a new package. In case of a penalty, businesses have the option to submit a reconsideration request and, based on the decision, appeal to the Tax Dispute Resolution Committee (TDRC) and competent courts, as outlined in the tax procedure laws.
The UAE Cabinet Decision No. (75) of 2023 outlines the penalties for “taxable persons” failing to meet their obligations under the UAE law, including timely filing and payment of corporate tax, maintaining proper records, and providing required information to the Federal Tax Authority. The decision also introduces a structure for voluntary disclosure penalties.
Corporate tax registrations were initiated on June 1, 2023, and so far, progress has been on track. Businesses are encouraged to register before the start of their financial year to avoid non-compliance penalties.
