The UAE Corporate Tax regime transforms the country’s tax landscape. While the 9% corporate tax rate looks simple, the penalties for non-compliance hit hard — and many are entirely avoidable. Whether you run a startup, manage an SME, or lead a large corporation, you must understand the fines under the new Tax Law to protect your business and stay compliant.
At Hallmark International Auditors, we understand the challenges companies encounter in this changing environment. In this blog, we outline the main corporate tax penalties listed by the Federal Tax Authority (FTA), the typical reasons for these fines, and how your business can remain compliant to avoid these fines.
What you can do to avoid penalties: –
1. Submit the Tax return on time:
It is the responsibility of the taxable person to ensure that their Tax return is submitted and tax is paid on time to the FTA. This should contain the basic and updated information required by the Tax Law in its full authenticity. Lack of such information can lead to incomplete filing and fines after the deadline. A Legal Representative or a Tax Agent can be appointed to provide support for the filing process.
Penalties for failing to submit tax return on time-
- AED 500 for each month till the first twelve months.
- AED 1,000 for each month from the thirteenth month.
2. Ensure that your tax payables are settled on time:
Paying your Corporate Tax on time is just as important as filing your return. The FTA has emphasised the importance of paying Corporate Tax well in advance of the deadline to ensure the payment is received before the deadline. Last-minute transfers can be risky, as bank processing times and electronic payment systems may cause delays. If the payment isn’t processed in time, the FTA will consider it late even if it was paid on the due date, which can result in administrative penalties for overdue payment.
Penalties for overdue tax payment:
- A monthly penalty is imposed at a rate equivalent to 14% per annum on any unpaid tax amount. This penalty is calculated for each month or part of a month starting from the day after the payment due date, and continues to accrue on the same date each month thereafter until the tax is settled.
- Determining the Due Date
For the purpose of calculating this penalty: - In the case of a Voluntary Disclosure, the due date for payment is 20 business days from the date of submission.
- In the case of a Tax Assessment, the due date is 20 business days from the date of receipt.
3. Relevant records under the Tax Procedures law:
Every in business or bound by obligations under the Tax Law must maintain records. This includes, accounting practices and commercial documentation, along with any tax-related information as in accordance with the guidelines established by the Executive Regulations.
Penalties for failing to maintain records:
- Each violation: AED 10,000
- Each repeated violation (Within 24 months after the last violation) : AED 20,000
4. Apply deregistration following the relevant provisions of Tax Law:
A taxable person must apply for deregistration within 3 months from the date they are no longer responsible for corporate tax. This can happen if the business stops operating or no longer meets the taxable threshold.
Penalties for failing to apply for deregistration-
Late submission of the application and on the same date each month (with a maximum limit of AED 10,000): AED 1,000
5. Notify the FTA regarding changes in tax records:
In case of an event that can cause a change in the tax returns or related documents, the taxable person must inform the FTA. It is the responsibility of the taxable person to update their information and maintain the authenticity of the data provided to the FTA.
Penalties for failing to notify the FTA regarding changes in tax records-
- Each violation: AED 1,000
- Each repeated violation (Within 24 months after the last violation): AED 5,000
6. Notify the FTA of the appointment/change of Legal Representative or Tax Agent:
A legal representative is a person or an entity that is authorized to act on behalf of another party (taxable person) in legal and regulatory events. Similarly, a Tax Agent is a person who supports taxable persons to meet their tax obligations. The representative needs to inform the FTA of his appointment within 20 days, according to the guidelines of the Executive Regulations.
Penalty for failing to notify FTA of the appointment/change of Legal Representative or Tax Agent-
Fine to be paid by the legal representative / Tax Agent for not notifying: AED 1,000.
7. Ensure Accuracy When Filing Tax Returns:
Filing your Corporate Tax return on time matters, but submitting it accurately is just as crucial. Even unintentional errors or missing information can lead to penalties. To stay compliant, always review your return carefully before submission. This includes:
- Misreporting taxable income
- Providing outdated or inconsistent business information
- Using incorrect tax period dates
- Failing to claim eligible deductions properly
Penalties for incorrect filing-
- AED 500 is imposed for incorrect filing, unless it is corrected before the Corporate Tax deadline.
- Voluntary disclosure: A monthly penalty of 1% of the tax difference will be charged starting the day after the tax return, tax refund application, or tax assessment notice is due; and will continue until the voluntary disclosure is submitted.
- Non-Voluntary disclosure:
Fixed Penalty- A one-time penalty of 15% on the tax difference will apply.
Monthly Penalty- An additional 1% of the tax difference will be charged for each month (or part of a month), calculated as follows:
When penalties apply:
- If a Voluntary Disclosure is submitted after an audit notice:
Penalties apply from the due date to the date of disclosure.
- If no disclosure is submitted:
Penalties continue until the FTA issues a tax assessment
8. Comply with Tax Audit Instructions carefully:
A tax audit is a process carried out by the FTA to ensure that the documents, financial records, and other information provided by the taxable person are correct and compliant with regulations.
Penalty for not complying with FTA for tax audit: AED 20,000
Non-monetary impact of persistent non-compliance:
Persistent non-compliance doesn’t just lead to penalties; it puts your business at serious risk, including tax evasion. The Federal Tax Authority (FTA) can take legal action or prosecute companies that deliberately ignore their tax obligations.
Under UAE Federal Decree-Law No. 7 of 2017 on Tax Procedures, tax evasion involves intentionally avoiding tax obligations or reducing payable tax through false information or deliberate inaction. This can lead to criminal charges, severe fines, and even imprisonment for responsible individuals.
Non-compliant businesses struggle to renew trade licences, secure government approvals, and maintain banking relationships. Over time, this behaviour damages credibility with clients, investors, and partners, weakening the company’s reputation and growth potential.
Repeated offences may also eliminate your chance to benefit from penalty relief or voluntary disclosure programs, making it even more expensive to fix compliance issues later.
Final Thoughts
Understanding the corporate tax structure in the UAE can seem daunting, but knowing the penalties and how to sidestep them is crucial for safeguarding your business. Compliance involves not just timely submission of tax returns, precise record-keeping, and quick communication with the FTA; it’s also about establishing a reliable and sustainable operation
At Hallmark International Auditors, we are dedicated to assisting businesses like yours in staying compliant, well-informed, and prepared for audits. Don’t let penalties accumulate; take proactive measures today to ensure you comply with the law.
