The UAE is always prominent for its business-friendly policies, and this is yet another pro-business decision. The Federal Tax Authority (FTA) has announced a penalty waiver for late Corporate Tax Registration. This, in turn, supports the UAE business sector and enhances mechanisms that enable taxpayers to meet their tax obligations efficiently. Corporate tax registration is mandatory within the specified timeline; any delay results in a hefty penalty. The current waiver will bring massive relief to numerous businesses, including start-ups. In this blog, we will understand the mechanism of this penalty waiver and which companies are eligible.
What is the Late Corporate Tax Registration Penalty?
As per UAE tax law, a taxable person must register for corporate tax with the FTA within the stipulated timeframe. FTA Decision No. 3 of 2024 specifies the various taxable persons’ corporate tax registration timeline. What if there is a failure to comply within the timeline? Cabinet Decision No. 10 of 2024 stipulates clearly that failure to comply with the registration timeline will result in a penalty of AED 10,000. Thus, a delay in registration will result in a huge penalty.
Penalty Waiver for Late Corporate Tax Registration
The FTA launched an initiative to waive the administrative penalty for late submission of corporate tax registration. The purpose of this incentive is to support businesses in the UAE so that they fulfill their tax obligations. However, there are conditions plus a deadline to claim the waiver. Let’s dig down in detail.
Waiver Conditions
To qualify for the waiver, the taxable person must submit the tax return within seven months from the end of the first tax period. For instance, if a business has a first year-end of 31st Dec, 2024, they must submit the tax return by 31st July, 2025. On the other hand, if an entity is exempt from corporate tax, it must submit the annual declaration within seven months from the end of the tax period. However, there are entities with varying circumstances concerning their registration. For instance, some entities might have registered already and received a penalty. Therefore, FTA has provided scenarios and recommended courses of action to claim the waiver. Let’s discuss all cases one by one.
Case 1:
The taxable person completed the registration late and was given a penalty. However, the penalty was unpaid, but the tax return was filed within the seven months from the end of the first financial year. In this case, the individual will get an exemption from the penalty.
Case 2:
The taxable person completes the registration late and gets a penalty. However, the penalty and the first tax return are both due. In this scenario, the taxable person must submit the tax return (or annual declaration) within seven months from the end of the financial year to avail of the penalty waiver.
Case 3:
The taxpayer completes the registration late, gets a penalty, and pays the penalty, but the tax return is still due. In this case, the taxpayer must submit the tax return (or annual declaration) within seven months from the end of the first year to get the corporate tax registration penalty waiver. As the penalty is already paid, the amount will be refunded to the taxpayer’s tax account.
Case 4:
The taxpayer completes the registration late, gets the penalty, pays the penalty, and submits the return within seven months from the end of the first financial year. In this case, the amount paid concerning the penalty will be refunded to the taxpayer’s tax account.
Case 5:
If a taxpayer did not submit the registration application at all, they must submit the registration application plus submit the tax return (or annual declaration) within seven months from the end of the first financial year. The taxpayer will get a penalty waiver.
Conclusion
The Federal Tax Authority (FTA) announced a relief in the form of a penalty waiver. Here’s the deal: If you submit your tax return within 7 months from the end of your first financial year, you could qualify for a full penalty waiver—even if you were late registering.
The FTA has broken down exactly how and when you can claim this relief across multiple scenarios.
Bottom line? If you missed the deadline, you’re not out of options. Act fast, file right, and you may avoid the AED 10,000 penalty—or even get it reversed.
Creative Zone Tax & Accounting
The penalty waiver covers most of the businesses operating in the UAE. Therefore, we recommend you contact us as soon as possible to submit the return on time and claim this relief. This will, in turn, save you money and also boost your business compliance in the UAE. Contact us today.
