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Get Familiar With the Corporate Income Tax Penalties5 min read

Author: Uwe Hohmann
Managing Partner, MBA Tax Law / Commercial- & Tax Consultant

The Federal Tax Authority (FTA) has established a rigorous framework of penalties to encourage adherence to tax laws and regulations. These penalties cover various aspects of non-compliance, including late registration, late submission of returns, and incorrect tax filings. Understanding these penalties is important for businesses operating in the UAE to maintain good standing and avoid financial repercussions.

Important penalties to be aware of are:

Late Registration Penalty: A fine of AED 10,000 is imposed for late registration for Corporate Income Tax. This penalty applies to businesses that do not submit their Corporate Income Tax registration applications within the timelines specified by the Federal Tax Authority (FTA).

Late Submission of Returns: Businesses failing to submit their tax returns on time face penalties, which can include a fine of AED 500 per month for the first 12 months and AED 1,000 per month from the 13th month onwards.

Late Payment Penalty: If the tax is not paid by the due date, a monthly penalty of 14% per year on the unsettled payable tax shall be imposed.

Incorrect Tax Return Penalty: Errors in tax returns that result in a tax difference can attract penalties. If the error is voluntarily disclosed, a monthly penalty of 1% on the tax difference shall apply. However, if the error is not disclosed before being notified of a tax audit, then a fixed penalty of 15% of the tax difference plus a monthly penalty of 1% on the tax difference shall apply.

Failure to Keep Records: Businesses must maintain accurate records. Failing to do so results in a penalty of AED 10,000 for the first violation, and if more than 1 violation occurs within 24 months of the first violation, the penalty is AED 20,000

Non-cooperation with Tax Audits: A penalty of AED 20,000 can be imposed for not facilitating tax auditors’ work.

How TME Services Can Support Your Business

Businesses must stay informed about these regulations and maintain diligent record-keeping to manage the UAE’s tax environment effectively.

With over 18 years of experience in the UAE and the Middle East, we specialize in legal, tax, accounting, and compliance matters. Visit our services page to learn more about everything we do.


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