The UAE government released Cabinet Decision no. 75 of 2023 on the Administrative Penalties for the Violations of Corporate Tax Legislation i.e., Federal Decree Law no. 47 of 2022. This Decision clarifies different instances that can lead to a penalty. Therefore, it is advisable for businesses to seek the expert services of Tax Consultants in UAE to ensure sufficient compliance and avert penalties for not submitting a tax return on time.
What is a corporate tax return?
A corporate tax return, also known as a corporate income tax return, is a document that corporations and other legal entities are required to file with the tax authorities to report their financial and tax-related information. This return is typically filed annually and serves as a means for the government to assess the corporation's tax liability based on its income, expenses, deductions, credits, and other relevant financial details. The company provides information on its revenue, expenses, profits, losses, assets, liabilities, and other financial data in the corporate tax return.
What is the duration of a corporate tax return?
The duration for corporate tax return filing in the United Arab Emirates (UAE) is once a year. Companies registered in the UAE are typically required to file their corporate tax returns annually. Companies need to register for corporation tax with the FTA for filing a tax return.
Penalties upon Failure to Submit a Tax Return
It is crucial for taxpayers, whether individuals or corporations, to be aware of their specific tax filing deadlines and adhere to them strictly. Failing to meet these deadlines may result in penalties, interest charges, and potential legal consequences. According to Decision No.-75-of-2023, MoF (Ministry of Finance specified these penalties in such cases:
Explanation of Penalties
According to the corporate tax law if a registrant fails to submit a corporate tax return in the timeframe allowed by legal authorities he will be charged 500 AED each month for one year. If he submits the tax return in this period, he will be exempted from the penalty fine. But if he doesn’t pay the tax return for one year, the fine penalty will be raised to 1000 AED each month.
Failure to meet the tax return filing deadline after registering for corporate tax in UAE can result in penalties according to Decision No. 75 of 2023, as specified by the Ministry of Finance. The penalties entail a fine of 500 AED for each month of delay in the first twelve months and 1000 AED for each month after that. These penalties apply from the day the legal timeframe ends for the company's tax return submission, and they continue on the same date for all subsequent months until the return is submitted.
Read more: UAE Corporate Tax Registration Exemptions
When will this penalty be imposed?
The penalty for failure to pay tax returns will be implemented from the day on which the legal timeframe ended for the registrant. And on the same date for all the subsequent months.
To put this all into perspective, let's consider a company in UAE whose timeframe for the submission of tax returns came to an end on 15 April 2023. The registrant will be charged 500 AED each month for the first twelve months (or for the first year) from April 2023 to April 2024. He will be charged 500 AED on the 15th date of every month in this period. If he still fails to submit the tax return the penalty will be increased from 500 AED per month to 1000 AED for the next year from April 2023 to April 2024. Again, he will be charged 1000 AED on the 15th date of each month in this period.
In conclusion, the timely submission of corporate tax returns is of utmost importance to avoid penalties and potential legal consequences in the United Arab Emirates. A corporate tax return is a vital document that allows tax authorities to assess a company's tax liability based on its financial and tax-related information. Companies in the UAE must file their tax returns annually, and the deadline for submission is typically 120 days from the end of the financial year.
Read more: How to Register for Corporate tax in UAE?
Choose the Best Corporate Tax Advisors in UAE
To effectively ensure compliance with the corporate tax law, it is advisable for Taxable Persons to seek the expert services of Tax Consultants in UAE. Companies should keep track of their financial year-end and ensure to meet tax return deadlines. Seeking our corporate tax advisory services and maintaining accurate financial records will help businesses avoid penalties and maintain a positive standing with the tax authorities. By adhering to tax regulations and fulfilling their tax obligations promptly, corporations can ensure a conducive business environment and foster trust among stakeholders. Thus, contact us today and we shall be glad to assist you.