UAE has set up strict penalties to ensure compliance with corporate tax regulations

Dubai: Starting from Dh500 per month for administrative non-compliance, the UAE government has strict fines in place to ensure businesses comply with the applicable corporate tax requirements of 9 per cent on taxable profits of over Dh375,000.

Expert tax consultants from across the UAE addressed attendees at the ‘Doing Business in the UAE’ seminar in Dubai on Tuesday to understand how and why UAE businesses can use corporate tax to their benefit.

The UAE has implemented one of the lowest corporate tax rates in the world, and it is already changing the perception of the country among global businesses, these experts added.

The UAE Ministry of Finance issued the critical Cabinet Decision, No. (75) of 2023, related to administrative penalties for violations concerning the corporate tax law. The decision specified penalties that will be imposed by the Federal Tax Authority, effective August 1, 2023, to ensure smooth implementation and compliance with the Corporate Tax Law.

Penalties can also accrue if there is any evidence of purposeful restructuring for tax evasion purposes. Any restructuring decision or formulation of tax groups when filing for corporate tax must have a ‘corporate reasoning’ to justify the purpose of such change, the panellists added.

With the advent of corporate tax, global businesses are looking to the UAE with renewed interest, these panellists commented – as the taxation changes the perception of the UAE as being a ‘tax haven’.

The expert commentators also added that while there are several qualifying activities to be tax-free, these companies have to be additionally cautious to ensure that the accounting and grouping of such activities are done carefully. The ‘substance’ aspect needs to be justified to ensure compliance with the rules and over 80 per cent of all free zone companies will also have to adhere to these regulations, the panel concluded at the event.