UAE Ministry of Finance Introduces Administrative Penalties for Corporate Tax Law Violations

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01 Sep 2023

The UAE Ministry of Finance has taken a significant step towards enhancing Tax compliance by issuing Cabinet Decision No. (75) of 2023. This decision pertains to the administrative penalties for violations related to the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, commonly known as the Corporate Tax Law. The new Cabinet Decision outlines the penalties to be imposed by the Federal Tax Authority for non-compliance with the Corporate Tax Law, with the effective date set as 1st August 2023.

Ensuring Compliant Implementation and Support for Corporate Tax Law:

The carefully designed Corporate Tax Law Penalties aim to balance successful implementation and foster compliance among UAE businesses. The objective is to avoid burdening businesses that dutifully follow the new regulations. Compliance with the Corporate Tax Law is a collective responsibility of all Taxable individuals and entities, as it aligns the UAE with the highest global standards in Taxation. This move drives sustainable economic growth in the UAE by creating a conducive legislative environment that promotes Tax compliance.

Key Provisions of Cabinet Decision No. (75) of 2023:

Under this Cabinet Decision, penalties will be imposed on individuals and legal entities, known as Taxable Persons, who fail to fulfill their obligations under the UAE Corporate Tax Law. The penalties will apply in cases of late filing and payment of Corporate Tax dues, as well as the failure to notify the Federal Tax Authority of any pertinent information requiring amendment in their Tax records. Additionally, the decision introduces a new structure for voluntary disclosure penalties to encourage greater transparency and compliance.

Penalties for Record Keeping and Submission:

Taxable Persons must maintain proper records and submit the required information specified in the Tax Law. Failure to adhere to these record-keeping and submission requirements will also attract penalties per Cabinet Decision No's provisions. (75) of 2023.

To ensure effective implementation and compliance with the Corporate Tax Law, the Ministry of Finance has issued Cabinet Decision No. (75) of 2023, outlining administrative penalties for Corporate Tax violations. Starting from August 1, 2023, the Federal Tax Authority can impose penalties for the following reasons:

  1. The failure to pay Corporate Tax on time.
  2. Withholding notification to the Federal Tax Authority regarding any modifications that mandate amendments to Tax Records.       
  3. Inadequate Record-Keeping.
  4. Non-submission of the required records and information specified in the Tax Laws.

  Introducing these administrative penalties aims to foster a culture of adherence to the Corporate Tax Law while fostering a business-friendly environment that promotes sustainable growth. With the implementation of Corporate Tax now in effect, businesses are encouraged to ensure timely compliance with the new regulations to avoid potential penalties and contribute to the nation's economic progress.

The UAE Ministry of Finance's recent announcements regarding new procedures and penalties under the Corporate Tax Law represent a significant step towards enhancing Tax compliance and providing businesses with clear guidelines. By introducing stricter regulations for maintaining accounting records and commercial books, updating Tax agent registration procedures, and offering clear guidelines for Qualifying Investment Funds, the government aims to create a fair and efficient Tax system. Moreover, the imposition of penalties for non-compliance reinforces the importance of adhering to Tax Laws and regulations. Businesses operating in the UAE should pay close attention to these developments to ensure smooth operations and compliance with the Corporate Tax Law.

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