To streamline the country’s taxation structure, the government has set up a new chapter of tax compliance and regulations within the business landscape of the UAE. Whereas, each institution guarantees to contribute collectively to the socio-economic development of the country. Under the existing corporation tax laws, failure to file a Corporate Tax (CT) return is punishable by a penalty. The Ministry of Finance has announced that these amendments introduced in the UAE will come into effect from 1 August 2023 as per Cabinet Decision No.75/2023. According to Federal Decree-Law No. 47/2022, these amendments established penalties for taxation violations on businesses and companies including penalty for late registration.
Tax registration timeline
To register for CT, the Federal Tax Authority (FTA) has provided certain deadlines to avoid tax evasion by taxable persons. The law, which came into effect in June last year, applies to tax periods beginning on or after June 1, 2023. The new FTA decision, which entered into force on March 1, 2024, has given a deadline for natural and legal citizens. Also, non-resident companies must apply for corporate tax registration.
Tax registration timeline of resident juridical persons
Before the effective date of the aforesaid decision, a resident person, incorporated or otherwise established or permitted resident, shall submit a tax registration application in accordance to the schedule below:
Tax registration timeline of non-resident juridical persons
- Before the effective date of this decision, a juridical person who was a non-resident must submit a tax registration application in accordance to the table:
- After the effective date of this decision, a juridical person who was a non-resident must submit a tax registration application in accordance to the table:
Tax registration timeline of natural persons
A natural person carrying on business or business activities in the state must file a tax registration application in accordance to the schedule, mentioned in the left side table.
Violations and administrative penalties on the taxation of corporations and businesses
2023 Cabinet Decision No. (75) is a schedule of violations and administrative fines related to the application of Federal Decree-Law No. (47) of 2022 on taxation of corporations and businesses.
How to register for corporate tax?
According to the UAE CT Law, taxable persons and certain types of exempt persons (such as qualified public benefit organizations and qualified investment funds) must register with the Tax Authority (CT) to obtain a Tax Registration Number (TRN). As per the law promulgated by FTA, the deadline for obtaining exemption and CT registration for certain categories of exempted persons under the UAE CT Law was presented in Decision No. 7 of 2023. To learn how to register the CT online, read the instruction below.
Penalty for not filing taxes
- 1% interest under section 234A, will be charged from an individual or company if they file late returns and have any unpaid tax in a year.
- As per section 271F, if you fail to file your ITR on time, a penalty of Rs.5000/ will be charged from the tax department. Penalties for this are detailed below:
- If your total income is less than or equal to Rs.5 lakh, you will have to pay a penalty of Rs.1,000 and Rs.5,000 if it is more than Rs.5 lakh. The deadline for this is July 31 or Sep 31. This penalty applies only if you file within this deadline.
Penalty for late registration for corporate tax
- Every business in the UAE must register for CT and obtain a tax registration number. Documents required for CT must be submitted correctly at the time of registration. The Ministry of Finance in the UAE has imposed a fine of AED10,000 on businesses that do not submit CT registration applications by the specified deadline.
- CT penalty for late registration submission can be very high. A business’s fiscal year ends in April and tax returns must be filed by March 15, or filing tax returns after the deadline can result in significant penalties.
- The following formula is used to determine the late payment penalty for CT, In UAE:
- A fixed penalty will be levied for the first month of delay as a percentage of the outstanding tax amount.
A further fixed penalty will be levied for subsequent monthly’s delay.
Interest is charged on the overdue tax amount from the due date till the full amount of tax is paid.
Also Read: How Corporate Tax is Calculated in UAE
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