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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:
- The failure to pay Corporate Tax on time.
- Withholding notification to the Federal Tax Authority regarding any modifications that mandate amendments to Tax Records.
- Inadequate Record-Keeping.
- 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.
Cabinet Decision No. (75) of 2023
On the Administrative Penalties for Violations Related to the Application of Federal Decree Law No. (47) of 2022 on the Taxation of Corporations and Businesses
Table of Violations and Administrative Penalties Annexed to Cabinet Decision No. (75) of 2023 on Violations Related to the Application of Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses
| Description of Violation | Administrative Penalty Amount in AED |
|---|---|
| Failure of the Person conducting a Business or Business Activity or having a Tax obligation under the Tax Procedures Law or the Corporate Tax Law to keep the required records and other information specified in the Tax Procedures Law and the Corporate Tax Law. | One of the following penalties shall apply: 1. 10,000 for each violation. 2. 20,000 in each case of repeated violation within 24 months from the date of the last violation. |
| Failure of the Person conducting Business or Business Activity or having a Tax obligation under the Tax Procedures Law or the Corporate Tax Law to submit the data, records and documents related to Tax in Arabic to the Authority when requested. | 5000 |
| Failure of the Registrant to submit a deregistration application within the timeframe specified in the Corporate Tax Law and its implementing decisions. | 1,000 in case of late submission of the application and on the same date monthly, up to a maximum of 10,000 |
| Failure of the Registrant to inform the Authority of any case that may require the amendment of the information pertaining to his Tax record kept by the Authority. | One of the following penalties shall apply: 1. 1,000 for each violation. 2. 5,000 in each case of repeated violation within 24 months from the date of the last violation. |
| Failure of the Legal Representative to provide notification of their appointment within the specified timeframes, in which case the penalties will be due from the Legal Representative's own funds. | 1000 |
| Failure of the Legal Representative to file a Tax Return within the specified timeframes, in which case the penalties will be due from the Legal Representative's own funds. | 1. 500 for each month, or part thereof, for the first twelve months. 2. 1,000 for each month, or part thereof, from the thirteenth month onwards. This penalty shall be imposed from the day following the expiry date of the timeframe within which the Tax Return must be submitted, and on the same date monthly thereafter. |
| Failure of the Registrant to submit a Tax Return within the timeframe specified in the Corporate Tax Law. | 1. 500 for each month, or part thereof, for the first twelve months. 2. 1,000 for each month, or part thereof, from the thirteenth month onwards. This penalty shall be imposed from the day following the expiry date of the timeframe within which the Tax Return must be submitted, and on the same date monthly thereafter. |
| Failure of the Taxable Person to settle the Payable Tax | 1. A monthly penalty of 14% per annum, for each month or part thereof, on the unsettled Payable Tax amount from the day following the due date of payment and on the same date monthly thereafter. 2. For the purposes of this penalty, the due date of payment in the case of the Voluntary Disclosure and Tax Assessment, shall be as follows: a. 20 Business Days from the date of submission, in the case of a Voluntary Disclosure. b. 20 Business Days from the date of receipt, in the case of a Tax Assessment. |
| The Registrant submits an incorrect Tax Return. | 500, unless the Person corrects his Tax Return before the expiry of the deadline for the submission of the Tax Return according to the Corporate Tax Law. |
| The submission of a Voluntary Disclosure by the Taxable Person in relation to errors in the Tax Return, Tax Assessment or Tax refund application pursuant to Clauses (1) and (2) of Article (10) of the Tax Procedures Law. | A monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be applied as of the date following the due date of the relevant Tax Return, the submission of the Tax refund application, or the Notification of the Tax Assessment and until the date the Voluntary Disclosure is submitted. |
| Failure of the Taxable Person to submit a Voluntary Disclosure in relation to errors in the Tax Return, Tax Assessment or Tax refund application pursuant to Clauses (1) and (2) of Article (10) of the Tax Procedures Law, before being notified by the Authority that it will be subject to a Tax Audit. | The following penalties shall apply: 1. A fixed penalty of 15% on the Tax Difference. 2. A monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be applied as follows: a. Where the Taxable Person submits a Voluntary Disclosure after being notified that it will be subject to a Tax Audit by the Authority, the penalty shall be imposed for the period from the day following the due date of the relevant Tax Return, or the submission of the Tax refund application or Notification of the Tax Assessment and until the date the Voluntary Disclosure is submitted. b. Where the Taxable Person fails to submit a Voluntary Disclosure, the penalty shall be imposed as of the date following the due date of the relevant Tax Return, or the submission of the Tax refund application or Notification of the Tax Assessment and until the date of issuance of the Tax Assessment. |
| Failure of a Person subject to Tax Audit, his Tax Agent or Legal Representative to offer facilitation to the Tax Auditor in violation of the provisions of Article (20) of the Tax Procedures Law, in which case the penalties will be due from the Person’s, Legal Representative’s or Tax Agent’s own funds, as applicable. | 20000 |
| Failure of a Person to submit, or late submission of a Declaration to the Authority, as required in accordance with the provisions of the Corporate Tax Law. | 1. 500 for each month, or part thereof, for the first twelve months. 2. 1,000 for each month, or part thereof, from the thirteenth month onwards. This penalty shall be imposed from the day following the expiry date of the timeframe within which the Declaration must be submitted, and on the same date monthly thereafter. |
