Fines and Penalties under UAE Corporate Tax: Which every Operative Business should know

UAE Corporate Tax Fines and Penalties

We can say the first Corporate Tax filing session is underway, and many UAE businesses have learnt that compliance doesn’t end with registration — it also includes filing with accuracy, record-keeping, and timely payments of dues.

The Federal Tax Authority (FTA) has issued clear guidelines for corporate tax fines and penalties for late filings, non-payments, and non-compliance. These penalties can add up as soon as any default is made in the system, including up to 14% annual interest on unpaid tax and fixed fines for administrative defaults.

In this blog, we aim to break down all major UAE Corporate Tax penalties, explain how they are calculated, and guide businesses on how to avoid FTA fines.

Legal Framework

All of the UAE Corporate Tax fines and penalties are levied by:

• Federal Decree-Law No. 47 of 2022 (UAE Corporate Tax Law)
• Cabinet Decision No. 75 of 2023 (Administrative Penalties for Tax Violations)
• Ministerial Decision No. 114 of 2023 (Clarifications on Corporate Tax administration and procedures)

Above all, together establishes the obligations on taxable persons and explains the consequences for non-compliance.

Fines and Penalties under UAE Corporate Tax

I. Failure in Records Keeping & Compliance

1. Failure to Keep Records

When it triggers: In case the Taxable Person fails to maintain or keep the mandatory accounting records, supporting documents, and information as per UAE tax law.

Responsible Person: Taxable Person.

Penalty Amount:

• AED 10,000 for each violation
• AED 20,000 for a repeat offence within 24 months

Penalty Type: Fixed & Repeated

2. Language Violation

When it triggers: In case the Company does not submit tax records, documents, or data in Arabic language upon request from the FTA.

Responsible Person: Person conducting business/person with a tax obligation.

Penalty Amount: AED 5,000 for each violation

Penalty Type: Fixed

3. Failure to Facilitate Tax Audit

When it triggers: In case a representative person, tax agent, or legal representative fails to provide the necessary support or access to the FTA during an audit under UAE CT Law.

Responsible Person: Person, Tax Agent, or Legal Representative.

Penalty Amount: AED 20,000 for each violation

Penalty Type: Fixed

4. Failure to Update Business Information

When it triggers: In case the registrant (Taxable Person) fails to notify the FTA of any major change in their business information (e.g., trade license details, address, and ownership structure).

Responsible Person: Registrant / Taxable Person.

Penalty Amount:

• AED 1,000 for each violation
• AED 5,000 for a repeat offence within 24 months

Penalty Type: Fixed & Repeated

5. Legal Representative – Failure to Notify Appointment

When it triggers: In case the legal representative of the Taxable Person does not inform the FTA of their appointment within the specified timeline.

Responsible Person: Legal Representative (from own fund)

Penalty Amount: AED 1,000

Penalty Type: Fixed

II. Delay in Filing & Declaration

1. Late Tax Return Submission

When it triggers: In case the Taxable Person fails to file a tax return within 9 months from the last day of the end of the financial year.

Responsible Person: Taxable Person.

Penalty Amount:

• AED 500 per month for the first 12 months

• AED 1,000 per month from the 13th month onward

Penalty Type: Monthly Accumulative

2. Late Declaration Submission

When it triggers: In case a Taxable Person fails to file any required declaration, e.g, for qualifying income or non-taxable person registration.

Responsible Person: Taxable Person.

Penalty Amount:

• AED 500 per month in the first 12 months

• AED 1,000 per month from the 13th month onward

Penalty Type: Monthly Accumulative

3. Late Deregistration

When it triggers: When a registrant Taxable Person fails to apply for deregistration within 3 months from the date they cease conducting business, or no longer meet the conditions that make them subject to Corporate Tax, for example, if the company is liquidated or permanently closed.

Responsible Person: Registrant Taxable Person.

Penalty Amount: AED 1,000 per month up to a maximum of AED 10,000

Penalty Type: Monthly Accumulative

4. Legal Representative – Late Filing

When it triggers: Where the legal representative fails to file the tax return within 9 months from the last day of the financial year. Note: penalty is payable from the legal representative’s own funds.

Responsible Person: Legal Representative.

Penalty Amount:

• AED 500 per month for the first 12 months

• AED 1,000 per month from the 13th month onward

Penalty Type: Monthly Accumulative till continuation in default

III. Errors & Failure in Timely Payment

1. Incorrect Tax Return

When it triggers: In case an incorrect tax return is submitted, and the error is not corrected before the filing deadline, i.e. 9 months from the end of the financial year.

Responsible Person: Taxable Person.

Penalty Amount: AED 500

Penalty Type: Fixed

2. Late Payment of Tax

When it triggers: In case the due tax amount is not paid within the 9 months from the end of the financial year.

Responsible Person: Taxable Person.

Penalty Amount:

14% per annum charged monthly on the unpaid tax amount.

• For tax returns, counted from the day after the due date.

• For voluntary disclosures or tax assessments: counted from 20 business days after submission or receipt.

Penalty Type: Monthly (Interest-based)

3. Voluntary Disclosure (Late Correction)

When it triggers: where the Taxable Person files a voluntary disclosure to correct errors in a previously submitted tax return, assessment, or refund application.

Responsible Person: Taxable Person.

Penalty Amount: 1% per month on the tax difference from the original due date until the voluntary disclosure is submitted.

Penalty Type: Monthly Interest-based

4. Non-Disclosure Before Audit (Pre-Audit Violation)

When it triggers: where the Taxable Person fails to voluntarily disclose errors before being notified of a tax audit by the FTA.

Responsible Person: Taxable Person.

Penalty Amount:

• Fixed: 15% of the tax difference

• Monthly: 1% per month on the tax difference until the FTA issues a tax assessment

Penalty Type: Fixed + Monthly Interest-based

How does Flyingcolour Tax and Consultant help you?

At Flying Colour Tax Consultant LLC, we help our clients in,

• Timely Registration for Corporate Tax and obtain their TRN

• File timely and accurate Corporate Tax returns

• Prepare for FTA audits and compliance checks with records and supporting documents

• Guiding on voluntary disclosures and penalty reviews

• Assistance in setting up accounting systems aligned with FTA requirements

FAQs

1. Are penalties the same for Free Zone companies?

Yes, all the administrative penalties are equally applicable to Free Zone and Mainland Companies for non-compliance.

2. What will be the penalty, if the Tax return is filed on 31 January 2026, for the Company whose financial year ended 31 December 2024?

Penalty would amount to AED 2,000 (AED 500 × 4 months).

Further, in case the taxpayer also delayed payment of tax due, the FTA will separately charge interest at 14% per annum (calculated monthly) on the unpaid tax amount, starting from 1 October 2025 until payment is made.

3. How much interest is required to be paid if the Tax return was filed on time (30 September 2025) but the Company forgets to pay AED 100,000 of tax due.
The payment is eventually made on 30 November 2025?

Interest payable would be AED 2,334, which is AED 100,000 × 1.167% × 2 months (@ 14% per annum, i.e. 1.167% per month)

4. How much will be the Penalty payable if the Taxable Person identifies an under-reported income which results in an AED 80,000 extra tax liability for FY 2024 (FY ended on 31 December 2024).

Penalty would amount to AED 4,800 i.e. ( 1% per month × 6 months × AED 80,000 )
(Plus 14% annual interest until payment is made.)

5. What will be the Penalty if the Company ceases business on 31 March 2025, but fails to apply for deregistration until 31 October 2025, 7 months late?

Penalty would amount to AED 7,000 (AED 1,000 per month × 7 months)

To learn more about Fines and Penalties under UAE Corporate Tax: Which every Operative Business should know, 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.