Case Study: Corporate Tax Penalty Waiver Initiative: How UAE Businesses Can Benefit
Disclaimer: The company names and scenarios used in this blog are fictional and meant solely for educational purposes. Any resemblance to actual persons or entities is purely coincidental.
Since the introduction of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses in the UAE, businesses have been struggling to stay compliant with their corporate tax registration and filing obligations. However, thousands of entities got an administrative penalty of AED 10000 under Cabinet Decision No. 75 of 2023, for failure in doing their initial Corporate Tax registration.
By taking into consideration the challenges faced by taxpayers, with regard to corporate tax registration, administrative penalties and related compliances, the Federal Tax Authority (FTA) has launched a relief initiative to waive or refund this penalty for eligible entities provided certain conditions are met.
In this blog, we'll break down the public clarification, outline the eligibility criteria, and offer practical examples to help UAE companies take advantage of this limited-time relief issued by the Federal Tax Authority (FTA).
Legal Framework at a Glance
- Corporate Tax Law: Federal Decree-Law No. 47 of 2022
- Administrative Penalties: Cabinet Decision No. 75 of 2023
- Waiver Initiative Effective Date: 14 April 2025 (applies retrospectively from 1 June 2023)
- Penalty Amount for Late Registration: AED 10,000
- Applicable to: Taxable Persons and some Exempt Persons
- Reference Document: Public Clarification CTP006 - Penalty Waiver
Who Can Benefit from the Waiver?
This initiative applies to:
1. Taxable Persons who failed to submit their corporate tax registration application on time but file their first tax return within 7 months from the end of their tax period
2. Exempt Persons (e.g., public benefit entities, qualifying investment funds) who initially registered but later received exemption approval from the FTA and submit an annual declaration within 7 months from the end of their first tax period.
3. Tax Group Members where the group return is filed within 7 months of their first tax period.
Key Conditions to Qualify for the Waiver
➤ The Tax Return (or Annual Declaration) must be filed within 7 months of the end of the first tax period or financial year.
➤ Applies to those taxpayers, even if the AED 10,000 penalty is already paid (in which case it will be refunded to the EmaraTax account).
➤ The waiver applies only to the first tax period.
Case Example 1 - Successful Waiver Claim
➤ Fictional Company: GulfTech Solutions FZCO
➤ First Tax Period: 1 Jan 2024 - 31 Dec 2024
➤ FTA Registration Deadline: 31 Mar 2025
➤ Penalty Incurred: AED 10,000 (Missed the deadline for Corporate Tax registration)
➤ Tax Return Filed: 15 July 2025
GulfTech Solutions failed to register for Corporate tax on time but submitted its First Corporate Tax return within 7 months from the end of its tax period. As a result, the Administrative Penalty of AED 10,000 was waived, and no payment was required.
Case Example 2 - Refund of Paid Penalty
➤ Fictional Company: Horizon Interiors LLC
➤ First Tax Period: 1 June 2023 - 31 May 2024
➤ Penalty Paid: AED 10,000 (Missed the deadline for Corporate Tax registration)
➤ Tax Return Filed: 1 December 2024
Although Horizon Interiors has already paid their late registration penalty with FTA, they submitted the first tax return within 7 months from the end of their tax period. The FTA credited AED 10,000 to their EmaraTax account as a refund.
Case Example 3 - No Waiver Due to Delay
➤ Fictional Company: Al Saqr Trading LLC
➤ First Tax Period: 1 Jan 2024 - 31 Dec 2024
➤ Tax Return Filed: 1 September 2025
Even though Al Saqr Trading missed the corporate tax registration deadline, and they have filed their tax return after 7 months, but within the 9 months from the end of their First tax period, the general deadline by FTA. No waiver was granted for them, and the penalty of AED 10,000 remained payable.
Practical Tips for Businesses
1. Act Fast: If you have missed the registration deadline, ensure to file your first tax return within 7 months from the end of your Tax period to get this benefit of penalty waiver.
2. Voluntary Disclosure: If you've already paid the penalty and qualify for the waiver based on the conditions, there is no need to submit a refund request separately, it will be automatically refunded to your EmaraTax account.
3. Tax Groups: Ensure your entire group's return is filed on time to get the benefit of this penalty waiver for all members.
4. Declaration for Exempt Entities: If you are an Exempt entity, don't forget to file your annual declaration within 7 months from the end of the first Tax period to secure this relief.
How Flyingcolour Tax Consultant Can Help?
At Flyingcolour Tax Consultant LLC, we will assist clients in:
- Filing Corporate Tax returns within prescribed timelines
- Registering for Corporate Tax or seeking exemptions
- Submitting Voluntary Disclosures or clarifications
- Managing EmaraTax account refunds and reconciliations
Final Thoughts
This penalty waiver initiative is a golden opportunity for UAE businesses to rectify past registration delays and avoid administrative penalties. By meeting the 7-month deadline, both taxable and exempt persons can benefit from a clean compliance record and financial relief.
Don't delay-check your tax return filing status today or speak to a tax advisor to ensure eligibility.
To learn more about Case Study : Corporate Tax Penalty Waiver Initiative, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.