With the introduction of the Corporate Tax regime in the United Arab Emirates (UAE), effective from June 1, 2023, businesses operating in the country are now subject to new compliance requirements under the Federal Decree-Law No. 47 of 2022. Among the most critical obligations are the timely registration for corporate tax and the accurate and timely filing of tax returns. Failure to meet these requirements can result in substantial administrative penalties, interest on unpaid tax, and reputational damage. In this blog, we outline the penalties for non-registration and late corporate tax filing in the UAE, and how businesses can stay compliant to avoid them.
1. Corporate Tax Compliance Framework in the UAE
The UAE Corporate Tax regime applies to all juridical persons incorporated in the UAE and foreign businesses with a permanent establishment in the UAE. The standard corporate tax rate is 9% on taxable income exceeding AED 375,000. All entities within the scope of this law are required to register with the Federal Tax Authority (FTA) and file annual tax returns within nine months of the end of their financial year.
As the regime becomes fully operational, the FTA has issued Cabinet Decision No. 75 of 2023 and Ministerial Decision No. 105 of 2023, which specify the penalties for violations, including failure to register or submit tax returns on time.
2. Mandatory Corporate Tax Registration
All businesses that fall under the Corporate Tax regime must register with the FTA, even if they are exempt or expect no taxable income. Registration deadlines are based on the date of license issuance, with staggered deadlines provided in FTA decisions.
Failure to Register Penalty:
- A fixed penalty of AED 10,000 will be imposed for failure to submit a corporate tax registration application within the prescribed time frame.
This penalty applies even if the company has no taxable income. The FTA expects all eligible entities to register through the EmaraTax platform by their assigned deadline.
3. Corporate Tax Filing Obligations
Every taxable person must file a corporate tax return within nine months from the end of the relevant financial period. For example, a company with a financial year ending on December 31, 2024, must file its return by September 30, 2025.
The return must include full financial disclosures, a tax computation, and relevant declarations regarding exempt income, foreign tax credits, and transfer pricing disclosures.
4. Penalties for Late Filing of Corporate Tax Returns
Timely filing is critical, and the UAE imposes strict penalties for delays. The current structure includes the following:
- Late Filing Penalty: The FTA is expected to impose a penalty of AED 500 to AED 20,000 depending on the duration of the delay and whether it’s a repeated offense.
- Late Payment Penalty: Delays in paying corporate tax due will attract:
- 2% of the unpaid tax as an immediate penalty;
- 4% of the unpaid tax monthly after the first month of delay;
- Up to a cumulative maximum of 300% of the unpaid amount.
Late filings not only invite financial penalties but also increase the risk of audits and further scrutiny by the FTA.
5. Additional Compliance Failures and Penalties
In addition to registration and filing penalties, the following non-compliance issues also carry administrative fines:
- Failure to Maintain Records: AED 10,000 (first offense); AED 20,000 (repeat offense).
- Failure to Submit Transfer Pricing Disclosures: AED 5,000 to AED 15,000 depending on severity.
- Failure to File a Tax Return by an Exempt Entity: AED 10,000 even if no tax is due.
- Submitting Incorrect Returns: Up to 50% of the underpaid tax amount, plus AED 3,000–AED 5,000 fixed fine.
These penalties underscore the importance of accurate, timely, and complete submissions to the FTA.
6. PEAK Business Consultancy Services: Corporate Tax Compliance Partner
PEAK Business Consultancy Services is a leading VAT and Corporate Tax consulting firm in the UAE. Our team of experts helps businesses navigate registration, filing, and audit readiness requirements under the new Corporate Tax law.
We offer services including:
- Corporate Tax registration on EmaraTax
- Return preparation and filing
- Transfer pricing documentation
- Penalty appeals and FTA representation
- Corporate tax impact assessments and planning
Stay ahead of compliance deadlines and avoid costly penalties with PEAK BCS by your side.
Visit https://www.peakbcs.com/ to schedule a consultation.
7. How to Avoid Penalties
To mitigate the risk of penalties for late filing or registration, businesses should implement the following best practices:
- Track Registration Deadlines: Know your FTA-issued deadline based on your trade license date.
- Maintain Up-to-Date Financial Records: Prepare audited financials and tax computations on time.
- Submit Returns Well Before the Deadline: Avoid last-minute filings which may fail due to system overload or documentation errors.
- Engage Qualified Tax Professionals: Work with experienced consultants like PEAK BCS to ensure full compliance.
Early planning and expert support are the most effective ways to avoid both financial and operational risks.
8. The Appeal Process for Penalties
Should you receive a penalty from the FTA, you may challenge it through the following steps:
- Submit a Reconsideration Request: Within 20 business days of receiving the penalty.
- Escalate to the Tax Dispute Resolution Committee (TDRC): If the initial request is rejected.
- Judicial Appeal: Take the matter to court if required.
Proper documentation and professional representation greatly improve the chances of a successful appeal.
9. Conclusion
The UAE’s Corporate Tax regime is a major development in the country’s fiscal landscape, and compliance is now a legal and strategic necessity. Non-registration and late filing can lead to heavy financial penalties and long-term consequences. Businesses must act quickly to understand their obligations and fulfill them in a timely and accurate manner.
PEAK Business Consultancy Services provides end-to-end support to ensure your corporate tax compliance is seamless, cost-effective, and penalty-free. Whether you’re a startup, SME, or large enterprise, PEAK BCS is your reliable tax partner in the UAE.
Take the next step towards full compliance by contacting PEAK BCS at https://www.peakbcs.com/.
