Ministry of Finance UAE sets AED 10,000 penalty for late corporate tax registration

Ministry of Finance UAE sets AED 10,000 penalty for late corporate tax registration

UAE Corporate Tax Registration and Penalty

The United Arab Emirates (UAE) has introduced a new penalty for late registration for corporate and business tax. Starting from March 1, 2024, businesses that fail to register on time will face an administrative penalty of AED10,000. The Ministry of Finance introduced this penalty to ensure that taxpayers follow tax regulations and register on time. The penalty aligns with those for late registration in excise and value-added tax. The penalty is part of Cabinet Decision No. 10 of 2024, which amends the previous laws to bring them into line with Federal Decree-Law No. 47 of 2022 on corporate and business taxation.

Consequences of not paying tax on time:

Businesses that do not submit their corporate tax registration applications within the timelines specified by the Federal Tax Authority will be subject to an administrative penalty of AED 10,000.

This penalty is intended to discourage non-compliance and encourage businesses to register for corporate tax on time. Failure to follow up on this new penalty could lead to further legal consequences, such as legal action or the suspension of business operations.

Purpose:

The primary purpose of this new penalty is to promote tax paid by businesses in the UAE. By imposing a high financial penalty for late registration, the UAE aims to ensure that businesses take their tax seriously and register for corporate tax in a timely manner. This will help the UAE to maintain a stable and transparent tax environment, which is essential for attracting investment and promoting economic growth.

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Implications:

The introduction of this new penalty will have several implications for businesses operating in the UAE. First, companies should be better able to manage their taxes and register for corporation tax on time. Second, the financial risks associated with non-compliance can increase, which can have a major impact on your company’s cash flow and overall financial health. Finally, it will make it easier for businesses to compete, as those who follow tax laws will not face the same financial penalties as those who do not.

Is there a deadline for paying corporate tax in the UAE? 

Yes, there is a deadline for paying corporate tax in the UAE. Businesses have up to 9 months from the end of the relevant tax period to submit their tax return and pay the corporate tax to the Federal Tax Authority. For example, a company with a first tax period beginning on June 1, 2023, will have a deadline up to February 28, 2025, while a company with a first tax period starting on January 1, 2024, would have a deadline up to September 30, 2025. This deadline is crucial for businesses to follow in order to avoid penalties and fines for late payment of corporate tax in the UAE.

Can a business request an extension to pay their corporate tax in the UAE? 

In the UAE, businesses subject to corporate tax can request an extension to pay their taxes under certain circumstances. The Federal Tax Authority (FTA) may grant extensions in specific cases, such as for exempt persons who are requested to register for corporate tax or for businesses with multiple licenses where the deadline is based on the previous issued license to determine the maximum period. Additionally, companies established overseas but now managed and controlled in the UAE after a certain date must apply to register for corporate tax within a specified time.

What is the maximum extension period for paying corporate tax in the UAE? 

The maximum extension period for paying corporate tax in the UAE is up to 9 months from the end of the relevant tax period. This extension allows businesses to submit their tax returns and pay the corporate tax to the Federal Tax Authority within this time period. For instance, a company with a first tax period starting on June 1, 2023, would have a deadline up to February 28, 2025, while a company with a first tax period commencing on January 1, 2024, would have a deadline up to September 30, 2025.

How can businesses pay their corporate tax in the UAE?

To pay corporate tax in the UAE, businesses must first register for corporate tax with the Federal Tax Authority (FTA). Businesses need to obtain a Tax Registration Number (TRN) by visiting the Federal Tax Authority’s (FTA) website and completing the online registration form. Essential documents such as a copy of the trade license, passport copies of owners and shareholders, Emirates ID, Memorandum of Association (MOA) or Article of Association (AOA), contact details, and corporate tax period information are important for registration. Subsequently, businesses can submit their registration applications online through platforms like EmaraTax.

The corporate tax rate in the UAE is 9% for taxable profits above AED 375,000. Businesses that meet the threshold must file a tax return with the FTA no later than nine months after the end of the financial year. There are certain exemptions for businesses operating in strategic sectors, such as government entities, government-controlled entities, extractive and non-extractive natural resource businesses, qualifying public benefit entities, qualifying investment funds, public pension or social security funds, or private pension or social security funds that are subject to regulatory review by the competent authority in the state and that meet any other conditions that may be prescribed by the Minister. Parent companies of tax groups should file one tax return on behalf of the entire group.

Benefits of registering for corporate tax in the UAE:

Registering for corporate tax in the UAE has many benefits for businesses.

It helps companies follow tax laws and stay informed about any changes, promoting transparency and responsibility. By registering, businesses show they are ethical, which builds trust with customers, partners, and investors. Financially, corporate tax registration reduces after-tax revenue, benefiting shareholders directly or indirectly through private pensions or investments. The UAE’s low 9% tax rate compared to other Gulf countries makes it an attractive place for business and investment. Corporate taxes also increase government revenue, reduce reliance on oil income, attract foreign investment, and increase the country’s GDP by 2-3% in the short term. Registering for corporate tax in the UAE positions businesses favorably in the competitive global market.

UAE Corporate Tax Registration

Conclusion:

The new administrative penalty of AED 10,000 for late registration of corporate and business tax in the UAE is a positive step towards promoting tax compliance and maintaining a stable tax environment. Businesses operating in the UAE should be aware of this new penalty and take steps to ensure that they register for corporate tax on time to avoid having to pay this financial penalty.

Who will approve your Corporate tax in UAE?

Federal Tax Authority (FTA) will approve the tax.

How to get Corporate Tax Registration Certificate?

Download Tax return from Emara Tax

  1. Submit the application online through https://eservices.tax.gov.ae/
  2. Login with UAE Pass if you have already registered (OR)
  3. Link with UAE Pass to access Emara tax account by entering your Emirates ID, Email ID, Contact number and login
  4. Your application will then be reviewed by FTA
  5. Once the review is done, FTA will notify if it is approved / rejected through email
  6. If it is approved, you can download the certificate from Emara Tax account
  7. If it is rejected, FTA will email the reason behind it.

*Through the above procedure, you can register for Corporate Tax, and a Corporate Tax TRN (Tax Registration Number), GIBAN

Contact FTA through Phone / Email for any assistance

Within UAE: 600509994

Outside UAE: +971 600509994

Email: info@tax.gov.ae

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