The United Arab Emirates (UAE) has long been known as a business-friendly environment with its strategic location, robust infrastructure, and favorable tax regime. However, as part of its commitment to enhance its tax system and align with global best practices, the UAE has recently introduced a new set of penalties for corporate tax violations. These penalties, which come into effect on August 1, 2023, are designed to ensure compliance with the UAE’s tax laws and procedures.
This article aims to provide an in-depth understanding of these new penalties, their implications for businesses, and how companies can ensure compliance to avoid these penalties.
Understanding the New Corporate Tax Penalties in UAE 2023
The UAE Ministry of Finance (MoF) has announced the issuance of Cabinet Decision No. (75) of 2023, which outlines administrative penalties for violations related to the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law). The penalties, which will be imposed by the Federal Tax Authority, will be effective from 1st August 2023. The penalties have been designed to ensure successful implementation and compliance with the Corporate Tax Law without burdening compliant UAE businesses. Penalties will be imposed on Taxable Persons, both individuals and legal entities, who fail to comply with their obligations under the UAE Corporate Tax Law. This includes failure to file and pay Corporate Tax due on time, failure to inform the Federal Tax Authority of any changes that may require the amendment of their Tax record, and failure to properly keep or submit the required records and other information specified in the Tax Law. A new structure has also been introduced for voluntary disclosure penalties.
The new penalties were introduced as part of Cabinet Decision No. (75) of 2023, which relates to violations of Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses. The penalties range from AED 500 to AED 20,000, depending on the nature and severity of the violation.
For instance, failure to keep the required records and other information specified in the Tax Procedures Law and the Corporate Tax Law can result in a Corporate Tax Penalties in UAE of AED 10,000 for each violation. If the same violation is repeated within 24 months from the date of the last violation, the penalty increases to AED 20,000.
Similarly, failure to submit data, records, and documents related to tax in Arabic to the Authority when requested can result in a penalty of AED 5,000. Failure to submit a deregistration application within the specified timeframe can lead to a penalty of AED 1,000 for each month of delay, up to a maximum of AED 10,000.
For any violation of these requirements, the penalties are as follows:
| No. | Description of Violation | Administrative Penalty Amount in AED |
|---|---|---|
| 1 | Failure of the Person conducting a Business or Business Activity or having a Tax obligation under the Tax Procedures Law or the Corporate Tax Law to keep the required records and other information specified in the Tax Procedures Law and the Corporate Tax Law. | One of the following penalties shall apply: 1. 10,000 for each violation. 2. 20,000 in each case of repeated violation within 24 months from the date of the last violation. |
| 2 | Failure of the Person conducting Business or Business Activity or having a Tax obligation under the Tax Procedures Law or the Corporate Tax Law to submit the data, records and documents related to Tax in Arabic to the Authority when requested. | 5,000 |
| 3 | Failure of the Registrant to submit a deregistration application within the timeframe specified in the Corporate Tax Law and its implementing decisions. | 1,000 in case of late submission of the application and on the same date monthly, up to a maximum of 10,000 . |
| 4 | Failure of the Registrant to inform the Authority of any case that may require the amendment of the information pertaining to his Tax record kept by the Authority. | One of the following penalties shall apply: 1. 1,000 for each violation. 2. 5,000 in each case of repeated violation within 24 months from the date of the last violation. |
| 5 | Failure of the Legal Representative to provide notification of their appointment within the specified timeframes, in which case the penalties will be due from the Legal Representative’s own funds. | 1,000 |
| 6 | Failure of the Legal Representative to file a Tax Return within the specified timeframes, in which case the penalties will be due from the Legal Representative’sown funds. | 1. 500 for each month, or part thereof, for the first twelve months. 2. 1,000 for each month, or part thereof, from the thirteenth month onwards.This penalty shall be imposed from the day following the expiry date of the timeframe within which the Tax Return must be submitted, and on the same date monthly thereafter. |
| 7 | Failure of the Registrant to submit a Tax Return within the timeframe specified in the Corporate Tax Law. | AED 500 for each month, or part thereof, for the first twelve months. AED 1,000 for each month, or part thereof, from the thirteenth month onwards. This penalty shall be imposed from the day following the expiry date of the timeframe within which the Tax Return must be submitted, and on the same date monthly thereafter. |
| 8 | Failure of the Taxable Person to settle the Payable Tax. | 1. A monthly penalty of 14% per annum, for each month or part thereof, on the unsettled Payable Tax amount from the day following the due date of payment and on the same date monthly thereafter. 2. For the purposes of this penalty, the due date of payment in the case of the Voluntary Disclosure and Tax Assessment, shall be as follows: a. 20 Business Days from the date of submission, in the case of a Voluntary Disclosure. b. 20 Business Days from the date of receipt,in the case of a Tax Assessment. |
| 9 | The Registrant submits an incorrect Tax Return. | 500, unless the Person corrects his Tax Return before the expiry of the deadline for the submission of the Tax Return according to the Corporate Tax Law. |
| 10 | The submission of a Voluntary Disclosure by the Taxable Person in relation to errors in the Tax Return, Tax Assessment or Tax refund application pursuant to Clauses (1) and (2) of Article (10) of the Tax Procedures Law. | A monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be applied as of the date following the due date of the relevant Tax Return, the submission of the Tax refund application, or the Notification of the Tax Assessment and until the date the Voluntary Disclosure is submitted. |
| 11 | Failure of the Taxable Person to submit a Voluntary Disclosure in relation to errors in the Tax Return, Tax Assessment or Tax refund application pursuant to Clauses (1) and (2) of Article (10) of the Tax Procedures Law, before being notified by the Authority that it will be subject to a Tax Audit. | The following penalties shall apply: 1. A fixed penalty of 15% on the Tax Difference. 2. A monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be applied as follows: a. Where the Taxable Person submits a Voluntary Disclosure after being notified that it will be subject to a Tax Audit by the Authority, the penalty shall be imposed for the period from the day following the due date of the relevant Tax Return, or the submission of the Tax refund application or Notification of the Tax Assessment and until the date the Voluntary Disclosure is submitted. b. Where the Taxable Person fails to submit a Voluntary Disclosure, the penalty shall be imposed as of the date following the due date of the relevant Tax Return, or the submission of the Tax refund application or Notification of the Tax Assessment and until the date of issuance of the Tax Assessment. |
| 12 | Failure of a Person subject to Tax Audit, his Tax Agent or Legal Representative to offer facilitation to the Tax Auditor in violation of the provisions of Article (20) of the Tax Procedures Law, in which case the penalties will be due from the Person’s, Legal Representative’s or Tax Agent’s own funds, as applicable. | 20,000 |
| 13 | Failure of a Person to submit, or late submission of a Declaration to the Authority, as required in accordance with the provisions of the Corporate Tax Law. | 1. 500 for each month, or part thereof, for the first twelve months. 2. 1,000 for each month, or part thereof, from the thirteenth month onwards. This penalty shall be imposed from the day following the expiry date of the timeframe within which the Declaration must be submitted, and on the same date monthly thereafter. |
Corporate Tax Planning in UAE 2023
At Adam Global, we pride ourselves on our extensive experience in providing comprehensive corporate tax planning services. Our clientele ranges from corporations to family-owned businesses and SMEs , and we offer a full suite of services including Tax Structuring, Direct and Indirect tax capabilities across a multitude of jurisdictions. Our team of tax experts are equipped to provide our clients with a holistic range of services.
Our unique blend of cross-border transaction experience and local tax knowledge enables us to provide innovative, reliable, and comprehensive Corporate Tax Planning in Dubai. With our global reach and established relationships with correspondent firms, we are positioned to offer corporate tax advice and services worldwide.
At Adam Global, we understand the complexities of corporate tax planning and are committed to guiding our clients through the process. Our goal is to help you navigate the tax landscape effectively, ensuring compliance while optimizing your tax strategy for business growth and success. Trust Adam Global to be your partner in corporate tax planning.
International Tax Services
Leveraging our expertise in cross-border transactions and local tax regulations, Adam Global offers innovative, reliable, and comprehensive Corporate Tax Planning in the UAE. Our international reach and established relationships with correspondent firms enable us to provide corporate tax advice and services on a global scale.
We specialize in creating tax-efficient structures for both inbound and outbound investments, helping clients select the most suitable vehicles for their investments, and advising on thin capitalization and foreign investment restrictions.
Transfer Pricing
In the current global climate, transfer pricing is receiving increased attention. Our local and international team specializes in assisting companies with various transfer pricing services, including:
- Preparation of local and global transfer pricing documentation tailored to your needs
- Evaluation of transfer pricing risks and provision of practical recommendations to mitigate risks and explore opportunities
- Advice on transfer pricing strategy development/planning
- Assistance in the negotiation and acquisition of an Advance Pricing Arrangement / Mutual Agreement Procedure with competent authorities
Economic Substance Regulations Compliance
Adam Global can carry out an economic substance diagnostic to help you meet the UAE’s economic substance requirements. We can assist in providing qualified Directors within your field of activities, ensuring your compliance with these regulations. Trust us to guide you through the complexities of economic substance regulations and ensure your business operations are in line with the law.
How Adam Global Can help in Tax Planning in UAE?
At Adam Global, we recognize the complexity of tax laws in the UAE and understand the challenges faced by businesses in ensuring compliance. With our team of seasoned tax experts and professionals, we provide tailored tax planning solutions to help you navigate through the intricacies of the tax system.
Our tax planning services encompass:
- Thorough Assessment: We conduct a comprehensive analysis of your business to identify potential tax liabilities and risks.
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- Ongoing Support: Our team stays by your side throughout the process, providing continuous support, advice, and updates on changing tax laws to help you adapt and plan accordingly.
In conclusion, tax planning is no longer just an option for businesses in the UAE; it’s an absolute necessity. The financial implications of non-compliance can be detrimental to your company’s success. Let Adam Global be your guiding light in navigating the complex tax landscape, safeguarding your business, and propelling you towards sustainable growth.
If you have any questions or would like to learn more about our tax planning services, please do not hesitate to reach out to us at +971565014164 or email us at info@dubaibusinessadvisors.com . We look forward to assisting you in optimizing your tax planning strategies and driving your business towards a prosperous future.
