UAE’s Implementation of New Penalty of AED 10,000 for Late Corporate Tax Registration

Published On: 17 April 2024

Updated On: 24 May 2024

By Sam Alex
Sam Alex is a seasoned accountant based in the United Arab Emirates with more than 7 years of experience in VAT consulting. With a keen eye for detail and a passion for numbers, Sam has spent over a decade helping businesses navigate the complex world of finance. His expertise lies in tax planning, financial forecasting, and strategic budgeting.

UAE’s Implementation of New Penalty of AED 10,000 for Late Corporate Tax Registration

Published On: 17 April 2024

Updated On: 24 May 2024

New UAE Cabinet Decision: Stricter Tax Compliance Measures

Recently, a significant penalty of 10,000 AED has been levied on businesses that neglect to file for corporate tax on time. According to the Ministry of Finance UAE, this step is part of the UAE government's most recent Cabinet Decision No. 10 of 2024, which marks a significant change in statutes affecting enterprises across the country. The decision involves major amendments to particular sections of Cabinet Resolution No. 75 of 2023, with a focus on administrative sanctions related to the implementation of Federal Decree-law No. 47 of 2022. This decree-law expressly addresses business and commercial tax issues.

Is It compulsory to register for Corporate Tax in UAE?

Enrolling corporate tax goes beyond a mere procedural formality; it represents a crucial responsibility entailing the provision of precise financial information, consisting of the foundation for determining tax liabilities. The Federal Tax Authority (FTA) assumes the role of a facilitator, offering a user-friendly digital platform to guide businesses through the registration procedure. Companies and qualified organisations within the new corporate tax structure are required to enrol without delay. Businesses should carefully organise their financial documents and complete their corporation tax registration as soon as possible, as a significant penalty of AED 10,000 awaits late registrations. This fine is intended to encourage people to complete their tax returns on time.

Comprehending the Novel Corporate Tax Sanction in the UAE

To discourage belated corporate tax enrollment, the Federal Tax Authority has implemented a new penalty of AED 10,000 under the updated legislation. Established as of March 1, 2024, this penalty serves not only to motivate taxpayers to adhere to the statutes but also to guarantee punctual corporate tax registration.

Implications of the Decision

This decision marks a critical point in the UAE's journey towards significant global expansion, emphasising its strategic importance. The implementation of a substantial financial penalty for delayed registration is a tactical move aimed at encouraging companies to prioritize their tax responsibilities and prevent last-minute rushes for registration. This action strengthens the UAE's dedication to upholding a secure and transparent tax setting, essential for enticing investments and nurturing economic advancement.

Furthermore, failure to comply with this new penalty could result in a variety of consequences, including:

Challenges in obtaining tax clearance certificates, inhibiting corporate operations, and participating in government bids.

Reduced reputation due to noncompliance with UAE legislation.

Increased attention from the Federal Tax Authority (FTA), perhaps leading to additional investigations and penalties.

Added financial obligations affecting the company's liquidity and general financial soundness.

Moreover, this decision underscores a synchronized approach to tax enforcement, as the imposed penalty of AED 10,000 aligns with penalties for belated registration across other tax categories like excise tax and value-added tax (VAT).

Arabic Documentation Mandate

A crucial clause for entities and individuals upholding tax responsibilities is the clause of all essential paperwork in Arabic upon request. Violation of this rule results in an AED 5,000 penalty.

  1. Cancellation Application Deadlines: Entities presenting withdrawal applications must adhere to specified timelines. Timely adherence ensures smooth operations and avoids unnecessary complications.
  1. Lack of Registration Application Submission: Previously, a penalty of AED 20,000 was enforced for delayed registration application submission. However, this penalty has been reduced to AED 10,000 following the revised decree. To avoid this penalty, taxable individuals must promptly file their registration applications.
  1. Absence of Deregistration Application Submission: The penalty framework for entities neglecting to file deregistration petitions within the stipulated timeframe has been updated as follows:
  1. Initial Penalty: An AED 10,000 fine is imposed.
  1. Gradual Reduction: The penalty reduces by AED 1,000 for each succeeding month of noncompliance, with a maximum total penalty of AED 10,000.

Taxable entities must meticulously adhere to the withdrawal protocol to avert unnecessary penalties.

Advantages of Corporate Tax Registration in UAE 

The process of obtaining corporate taxation in the UAE presents several advantages for enterprises.

Specifically, it allows businesses to comply with tax laws and stay up to date on any changes, fostering transparency and accountability. 

Businesses that register demonstrate their commitment to ethical behaviour, fostering trust among customers, associates, and financiers. 

From a fiscal standpoint, corporation taxation reduces post-tax earnings, which benefits shareholders directly or indirectly by increasing individual retirement plans or investments. 

Registering for corporation tax in the UAE helps businesses avoid penalties and fines that could jeopardize their financial security.

The implementation of the AED 10,000 penalty for late corporate tax registration signifies a crucial stride in the UAE's tax domain. At Audit Firm, we are unwavering in our commitment to aiding enterprises in navigating this ever-changing regulatory environment with assurance. Our team of experts is ready to provide specialized advice, providing comprehensive viewpoints and support to ensure flawless adherence to corporation tax regulations. 

We emphasize comprehensive preparation and timely submission of all required papers, allowing our clients to focus on their core business activities with confidence. By staying current on the latest developments in the UAE's Corporate Tax framework, we can advise our customers on potential consequences and assist them in optimizing their tax position. Rely on Audit Company as your reliable partner in achieving compliance and success in the UAE's changing tax sector.