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Dubai: Recently Published Administrative Penalties for Tax Violations6 min read

Author: Omar Sami
Managing Partner Attorney at German Law Legal- & Tax Consultant
Dubai has just published significant administrative penalties related to violations on the new Corporate Tax regime.

Dubai has recently released crucial information regarding administrative penalties pertaining to violations under the new Corporate Tax regime. If you are a business owner or taxpayer in Dubai, here’s what you should be aware of concerning these penalties:

1. Nature of Penalties

The newly issued Cabinet Decision outlines a range of administrative penalties to be imposed on taxpayers found in violation of the tax laws. These penalties aim to ensure compliance and foster a fair and transparent tax environment.

2. Applicable Situations

The penalties apply to various violations concerning tax matters, including but not limited to:

FAILURE TO REGISTER / TO KEEP THE REQUIRED RECORDS

Corporations and businesses failing to register for taxation within the prescribed timeline will be penalized.

LATE FILING

Taxpayers who submit their tax returns after the stipulated deadline will face penalties.

UNDERREPORTING OF INCOME

Misrepresenting or underreporting income will result in severe consequences.

NON-PAYMENT or LATE PAYMENT OF TAX

Entities that fail to pay their taxes or delay payments will be subject to penalties.

3. Severity of Penalties

The Cabinet Decision ensures that penalties are proportionate to the gravity of the violation. Depending on the nature and extent of the infraction, penalties can include:

MONETARY FINES that vary based on the severity of the violation:

– One-time or monthly: AED 1.000 to AED 20.000 (for each violation) for administrative failures

– A monthly penalty of 14 % p.a. for each month on Failure of the Taxable Person to settle the Payable Tax.

POTENTIAL SUSPENSION of business activities until the tax dues are settled.

LEGAL ACTIONS – including possible prosecution, in cases of serious or repeated offenses.

4. Tax Audits

The tax authority may conduct a tax audit when it isnecessary for protecting the integrity of the tax system. Such case can occurwhen the taxable person, or any person associated with it may not comply with the CIT regime. Such person will be notified by the authority regarding the tax audit at least ten business days prior to the tax audit.

For the purposes of the tax audit, the authority may inspect:

-The Premisses, documents and assets available at the premises

-Data and records stored electronically

-Accounting systems used by the Person subject to the tax audit

The authority may make copies of documents, mark the original documents and assets for the purpose of indicating that they have been inspected, seize documents and assets and obtain and record information relating to the premises, assets, documents, and accounting systems that have been inspected and recorded.

If you have any questions or require assistance understanding these new penalties and their implications, don´t hesitate to contact our tax experts. We are here to help you navigate these changes and achieve seamless tax compliance.

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