The UAE Federal Tax Authority (FTA) has launched a relief measure for businesses to have the AED 10,000 Corporate Tax late registration penalty reduced. It extends the Corporate Tax registration deadline to those companies that have not registered their Corporate Tax and helps them become compliant without having to pay the administrative penalty, under certain conditions.

Eligibility is determined and the waiver is automatically granted when the eligibility criteria are met. There is no separate application for businesses to submit for benefits of the initiative.

What Is the AED 10,000 Corporate Tax Penalty?

The UAE Corporate Tax registration process for businesses and certain exempt entities will be mandatory and the deadline for its completion will be as per the Federal Tax Authority’s direction. An administrative penalty of AED 10,000 is imposed for late submission of the Corporate Tax registration application.

The UAE Cabinet has granted a waiver initiative to allow businesses to register for the new Corporate Tax system, despite the fact that many missed the registration deadline, under the guidance of the FTA.

What Is the FTA Penalty Waiver Initiative?

The FTA’s penalty waiver scheme allows eligible taxable persons, as well as some exempt persons, who are due to register for Corporate Tax, to obtain a waiver of the AED 10,000 late registration penalty. The program only applies if the taxpayer has the qualifications set forth by the FTA. After those conditions are met, the waiver will be completed automatically within the EmaraTax system and without the need for a reconsideration request or a waiver application for the penalty.

Who Can Benefit from the Waiver?

The initiative may benefit a taxable person or eligible exempt person who:

Is required to register for Corporate Tax.
Received, or may receive, the AED 10,000 late registration penalty.
Completes their 1st Corporate Tax Return (or 1st Annual Declaration for eligible exempt persons) within 7 months of the end of their 1st Tax Period or 1st Financial Year.

The FTA has confirmed that this special situation is for the initial Tax Period only. Does not apply to future Corporate Tax Returns.

Why Is the Seven-Month Deadline Important?

The Corporate Tax Return for UAE Corporate Tax is usually filed within 9 months of the end of the applicable tax period. To avail of the late registration penalty waiver, the first Corporate Tax Return must be submitted within 7 months after the end of the first Tax Period for businesses. The earlier filing deadline is a special element of the waiver initiative and does not permanently substitute the normal filing deadline of nine months as provided for in the Corporate Tax Law.

Does the Initiative Apply to Every Business?

No. The FTA has made it clear that the initiative is only for the first Tax Period during which the taxable person/exempt person is obliged to register. The classification of whether a business qualifies for relief depends on its own first Tax Period and whether all the waiver conditions will be fulfilled during the time allowed. The filing deadline varies accordingly, depending upon the financial year end of the business.

What Happens If You Already Paid the AED 10,000 Penalty?

The initiative is still of great value to businesses that have already paid their late registration fine. Once they meet the conditions for the waiver, the FTA automatically credits the AED 10,000 to the taxpayer’s EmaraTax account.

The credited amount can then be applied towards unpaid taxes due in the future or refunded as per the FTA’s refund policies. There is no need to file a separate claim for a credit to be issued.

What If the Penalty Has Not Been Paid?

Favorable benefits may also accrue to businesses that have been penalized but not yet paid the penalty. The late registration penalty will be automatically waived if they have registered as a corporation and filed their first Corporate Tax Return in the 7-month period. Likewise, businesses may be eligible to register even if they failed to register in a timely manner, provided that they register and file within the relevant time period.

How Does the Automatic Waiver Work?

The one great thing about this initiative is that it automatically processes the procedure.

As soon as the taxpayer meets all the requirements:

FTA reviews the taxpayer’s eligibility.
The late registration fee will be waived automatically.
If the penalty has already been paid, the penalty amount will be added to the taxpayer’s EmaraTax account.

Submitting a reconsideration request or a new application with a business is not required for the waiver.

Steps Businesses Should Take

Businesses should do the following to maximize the benefits from the waiver initiative:

Register for Corporate Tax if required, using EmaraTax.
Identify the end date of the first Tax Period / first Financial Year.
Maintain proper accounting records and documentation.
Submit the first Corporate Tax Return or Annual Declaration within 7 months from the end of the first Tax Period.
Keep an eye on their EmaraTax account for any penalty reduction/credit.

Businesses that want to take advantage of the FTA waiver initiative should follow these steps to meet FTA requirements.

Common Misunderstandings

All businesses must file by the same date.

This is incorrect. The deadline varies according to the end date of the taxpayer’s first Tax Period or Financial Year. Each business will have its own deadline, however.

An additional waiver application is required.

No. The FTA will automatically issue the waiver if all the conditions have been met.

Businesses that already paid the penalty can’t benefit.

Incorrect. The FTA will automatically credit the AED 10,000 to the taxpayer’s EmaraTax account if they meet the requirements.

Why Businesses Should Act Early

While it’s a helpful measure, businesses must not wait until the last minute to meet compliance obligations. A healthy corporate tax return will build on exacting financial statements and accounting records, along with supporting paperwork. Early filing allows businesses sufficient time to address any problems before the deadline and avoids the risk of not meeting the conditions for the waiver.

The FTA has also urged businesses that have yet to register for Corporate Tax to do so and file their first tax return by the deadline to avail the scheme.

Final Thoughts

AED 10,000 Corporate Tax late registration penalty waiver is a crucial tool for businesses in the UAE that meet certain conditions to register without paying the entire late fees.

Businesses must register where necessary and submit their first Corporate Tax Return (or first Annual Declaration for eligible exempt persons) within seven months of the end of their first Tax Period or first Financial Year. This initiative will only cover the first Tax Period and will be processed automatically with no need for a waiver request to be submitted through EmaraTax.

Participating businesses may also be entitled to benefits, since the FTA will automatically credit the AED 10,000 amount to their EmaraTax account when they meet the waiver requirements. Knowing the eligibility criteria and timely filing will ensure that businesses benefit from this relief without breaching UAE Corporate Tax obligations.