UAE Corporate Tax Update

Introduction

The UAE Ministry of Finance (MoF) announced the issuance of Cabinet Decision No. 75 of 2023 addressing administrative fines for violations relating to the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law).

The Cabinet Decision describes the administrative penalties that will be imposed by the Federal Tax Authority (FTA) and will come into effect 1 August 2023.

Description of Violations

1. Record Maintenance

Failure to keep the required records and other information specified in the Tax Procedures Law and the Corporate Tax Law.

Accounting records and commercial books shall include the following (As per Tax Procedure Law)

• Balance sheet and profit and loss accounts.
• Records of wages and salaries.
• Records of fixed assets.
• Inventory records and statements (including quantities and values).

All documents supporting the entries in the accounting records and commercial books, includes:

• Correspondence, invoices, licenses, and contracts related to the Business.
• Documents containing details of any election, assessment, determination, or calculation made by a Taxpayer in relation to the Tax affairs of its Business, including the basis, or method of assessment, determination or calculation made.

2. Documents in Arabic

Failure to submit the data, records and documents related to Tax in Arabic to the Authority when requested.

Note:

a. Tax Return, data, information, records, and documents related to the Tax are by default, submitted in Arabic (Art 5 of Tax Procedure Law).

b. The Authority may accept in English.

• Accuracy of the translated document is responsibility of the tax payer, including costs.

3. Deregistration Violation

Failure to submit a deregistration application within the timeframe.

Note:

a. UAE CT Deregistration can be found on Article 52 of Federal Decree-Law No. 47 of 2022.

b. Federal Tax Authority’s issued Decision No. 6 of 2023 explains the Tax Deregistration Timeline.

• In the case of liquidation, etc., a Taxable Person must apply to the FTA for CT deregistration.
• A Taxable UAE resident Person (natural or juridical as defined by the CT Law) may apply for Tax Deregistration within three (3) months of business closure, dissolution, liquidation, or otherwise.

4. Failure to Amend Information with the Authority

Failure to inform the Authority of any case that may require the amendment of the information pertaining to his Tax record kept by the Authority

Note:

To avoid such problems, taxpayers should ensure they keep the tax authority informed about any relevant changes in their circumstances that could impact their tax liability.

This includes (but not limited to):

a.?All legal documents must be always updated (licenses, POA, Articles or MOA).

b. Passport, Emirates ID of the Partners, or Authorized person.

c. Address, contact details such as email, mobile and landline numbers.

5. Failure to Notify FTA on the Legal Representative Appointment

Failure of the Legal Representative to provide notification of their appointment within the specified timeframes, in which case the penalties will be due from the Legal Representative's own funds.

Note:

A timely and responsible Legal Representative ensures that the taxpayer's tax affairs are handled efficiently and in accordance with the law.

By providing notification promptly, the taxpayer's interests are safeguarded, and the risk of errors, omissions, or potential fraud is minimized.

6. Legal Representative Fails to Submit the Tax Return

Failure of the Legal Representative to file a Tax Return within the specified timeframes, in which case the penalties will be due from the Legal Representative's own funds.

This penalty shall be imposed from the day following the expiry date of the timeframe within which the Tax Return must be submitted, and on the same date monthly thereafter

Note:

The penalties will start to accrue from the day immediately following the expiration date of the timeframe within which the Tax Return was supposed to be submitted.

For example, if the deadline of the corporate tax return is set on 30 September 2025 and the return were submitted on 03 October 2025.?Then,

• The fixed penalty will be AED 500.

In addition to the above, there is also a related variable penalty just a VAT/Excise tax.

7. Failure to Submit the Return by the Taxpayer

Failure of the Registrant to submit a Tax Return within the timeframe specified in the Corporate Tax Law.

This penalty shall be imposed from the day following the expiry date of the timeframe within which the Tax Return must be submitted, and on the same date monthly thereafter

Note:

The penalties will start to accrue from the day immediately following the expiration date of the timeframe within which the Tax Return was supposed to be submitted.

For example, if the deadline of the corporate tax return is set on 30 September 2025 and the return were submitted on 03 October 2025.?Then,

• The fixed penalty will be AED 500.

In addition to the above, there is also a related variable penalty just a VAT/Excise tax.

8. Failure to Settle any Tax Payable (on Return)

Failure of the Taxable Person to settle the Payable Tax.

Note:

It will be noted that the 14% is per annum rate.

This means that Monthly penalty rate: 14% / 12 months = 1.17% (approximately).

9. Failure to settle any tax payable On Voluntary Disclosures or Tax Assessment

Failure of the Taxable Person to settle the Payable Tax related to Voluntary Disclosure

Note:

For the purposes of this penalty, the due date of payment in the case of the Voluntary Disclosure and Tax Assessment, shall be as follows:

• 20 Business Days from the date of submission, in the case of a Voluntary Disclosure.
• 20 Business Days from the date of receipt, in the case of a Tax Assessment.

10.?Incorrect Tax Return

The Registrant submits an incorrect Tax Return.

Note:

If the taxable persons make the correction of the Tax Return before the expiry of the deadline, no penalty will be imposed.

11.?Submission of the Voluntary Disclosures with Underpayment

The submission of a Voluntary Disclosure by the Taxable Person in relation to errors in the Tax Return, Tax Assessment or Tax refund application.

Note:

Monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be applied as of the date following the due date of:

a. Date following the due date of the relevant Tax Return (for Tax Return).

b. Date following the due date the submission of the Tax refund application (For cases of Over refund).

c. Date following the due date of the Notification of the Tax Assessment and until the date the Voluntary Disclosure is submitted (In case of Tax Assessment with tax payable).

12.?Failure to submit Voluntary Disclosures

Failure of the Taxable Person to submit a Voluntary Disclosure in relation to errors in the Tax Return, Tax Assessment or Tax refund.

Note:

There are two (2) penalties involve here:

• Fixed penalty of 15% will be imposed on the Tax Difference.
• Monthly Penalty: In addition to the fixed penalty, there is a monthly penalty of 1% on the Tax.

Further, Voluntary Disclosure submitted after Tax Audit Notification: If the Taxable Person submits a Voluntary Disclosure after being notified of a Tax Audit by the Authority, the monthly penalty will be imposed from the day after the due date of the relevant Tax Return, Tax refund application, or Notification of the Tax Assessment until the date the Voluntary Disclosure is submitted.

13.?Failure to Facilitate the Work of the Tax Auditor

Failure of the Taxable Person to offer facilitation to the Tax Auditor in violation of the provisions of Article (20) of the Tax Procedures Law

Note:

The statement pertains to a situation where a person subject to a tax audit, their tax agent, or legal representative fails to provide the necessary cooperation and facilitation to the Tax Auditor in violation of the provisions mentioned in Article (20) of the Tax Procedures Law.

Because of not offering facilitation to the Tax Auditor, the person subject to the tax audit, their legal representative, or tax agent may be subject to penalties.

14.?Failure to Submit Declaration

Failure of a Person to submit, or late submission of a Declaration to the Authority, as required in accordance with the provisions of the Corporate Tax Law.

Note:

A declaration is additional information requested by the Authority and must be submitted within timeline.?It applies to:

a. Tax Return (Art 53 of the CT Law) on declaration of Exempt Person as per Art 4 of the UAE CT Law.

b. Under transfer pricing on the transactions with Related parties and connected persons (Art 55 of the CT Law).

For better understating about UAE Corporate Tax, reach out to us on: ?? [email protected] | ?? +971 4 222 7355, +971 2 622 2300.