Understanding the Corporate Tax Violations and Penalties Under UAE Law
Awatif Mohammad Shoqi Advocates & Legal Consultancy
Introduction
Cabinet decision No. (75) of 2023 established a new table of administrative fines and penalties relating to corporation tax offenses. These new administrative fines are imposed by the amended cabinet decision No. (10) of 2024. The UAE Corporate Tax Law is governed by the Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses.
According to Article 1 of cabinet decision No. (75) of 2023, important terms such as due tax and tax difference are stipulated. It also establishes rules for tax audits and administrative penalties for failure to pay taxes imposed by authorities. The tax amount calculated and imposed in accordance with corporate tax law is known as the due tax. Administrative penalties may be imposed by the authority for violations of the corporation tax legislation, the tax processes law, or cabinet decisions. A tax audit is a procedure by which the authority maintains or verifies that records, data, or goods follow the Tax Procedures Law or the Corporate Tax Law.
Following Article 2, penalties apply for various offences, such as failure to keep the tax records, refusing to submit tax documents or any other relevant documents in Arabic when it is necessary, and failing to deregister within the specified timeframe.
In accordance with Article 7, companies that fail to submit their tax returns beyond the deadline will be fined 500 AED every month. This fine can increase to AED 1,000 per month after a year. Additionally, Article 8 further imposes an annual penalty of 14 percent for nonpayment of taxes. If someone submits an incorrect tax return, they may also face a 500 AED penalty unless they correct it before the deadline.
Article 10 states that a 1% monthly penalty on the tax difference may be imposed if errors were corrected after they were discovered. A further 15% penalty will be imposed if the tax difference is found during a tax audit. According to Article 12, companies that refuse to cooperate with tax audits shall be subject to AED 20,000 penalties. Further Article 13 states that fines for late or missing tax declarations at 500 AED per month and it may increase after a year.
In accordance with the recent cabinet decision, a new penalty was imposed. Article 14 imposes fines of 10,000 AED for businesses not registering for corporate tax on time. Another recent rule states that failure to submit a voluntary disclosure before a tax audit notice results in a 15% fixed penalty on the tax difference, plus a 1% monthly penalty.
Conclusion
The cabinet regulation specifies the administrative penalties related to corporate tax violations. It also highlights the importance of understanding the potential issues and consequences, as well as adhering to the new regulations. Legislation aims to ensure companies stay transparent and adhere to tax regulations.