UAE Waives Late Corporate Tax Penalties

UAE to Waive Corporate Tax Registration Penalties – What You Need to Know About New Regulations?

On May 7, the UAE Federal Tax Authority (FTA) announced that it has begun executing the UAE Cabinet's decision to exempt certain corporate taxpayers from administrative penalties if they submitted their registration applications late. The aim of the new regulations is to simplify tax procedures and encourage voluntary compliance across all business sectors.

Who is eligible for penalty exemption?

The penalty exemption applies to taxpayers (or exempt categories) who submit their tax returns (or annual declarations) within seven (7) months following the end of their first tax period (or financial year). Previously, this period was nine months, so the new regulations require faster processing.

It is important to note that the seven-month deadline applies to the first tax period, regardless of whether the first tax return deadline was due before or after the implementation of the new decision. Taxpayers who have already paid the penalty for late registration can reclaim the amount, which will be credited to their accounts at the FTA.

What happens to penalties that have already been paid?

According to the FTA announcement, not only those who have not yet paid the penalty will benefit from the exemption, but also those who have previously settled the debt. For them, the amount will be refunded and credited to the taxpayer's account. This represents a significant relief for businesses, especially for those who submitted their registration applications on time but missed the declaration deadline for some reason.

How to apply for the exemption?

The FTA has provided detailed instructions on how to benefit from the penalty exemption:

1. For already registered taxpayers with penalties:

If the business is registered and has received a late penalty but has not yet paid it, they must submit their tax return (or annual declaration) for the first tax period within seven months to benefit from the exemption.

2. For already registered and penalty-paid taxpayers:

If the penalty has already been paid, but the tax return is submitted within seven months, the paid amount will be refunded and credited to their FTA account.

3. For not yet registered taxpayers:

If the taxpayer has not yet submitted their registration application, they must register immediately and submit the tax return within seven months from the end of the first tax period to be eligible for penalty exemption.

The FTA's Goal: Faster and Simpler Tax Administration

In alignment with the Cabinet's decision, the FTA's main goal is to ensure faster and simpler handling of tax matters for all business sectors. Encouraging voluntary compliance and reducing administrative barriers provides significant advantages for businesses, particularly for newly registering companies. The FTA continues to communicate with business sectors to increase compliance rates and facilitate the handling of tax matters.

Increasing Tax Awareness in UAE Business Sectors

The head of the FTA highlighted that in the first quarter of this year, there was a significant increase in corporate tax registrations, exceeding 543,000. This number also shows that the business sector increasingly recognizes the importance of complying with tax regulations and adapts to the new regulatory environment.

Summary

The penalty exemption introduced by the UAE government and the FTA aims to ease the tax processes and support businesses in faster registration and tax declarations. The new regulations are particularly favorable for those who wish to fulfill their obligations on time, as they can not only be exempted from late penalties, but also reclaim already paid amounts. This new approach not only reduces the administrative burdens on businesses but also promotes the strengthening of voluntary compliance in the country in the long term.

(Source: Federal Tax Authority announcement.)