UAE Corporate Tax: What businesses should know about late registration fine waiver

Ever since the timelines for corporate tax registration was announced in February/March 2024,  failure to register within specified timelines triggered an administrative penalty of Dh10,000.

In May, the Federal Tax Authority (FTA) launched an initiative to waive the late registration penalty. A detailed public clarification (CTP006) has now been issued explaining the details of the penalty waiver scheme. Here are the critical points emerging from the public clarification.

The penalty waiver initiative is available not just to companies but also to individuals registered for corporate tax. The eligibility condition is simple. The tax return must be submitted within 7 months – instead of the usual 9 months - from the end of the first tax period.

The business community initially misunderstood that the deadline to submit the tax return is July 31. However, July 31 applies only for January to December period. Entities following April to March financial year should submit the tax return by September 30.

Entities exempt from corporate tax such as Qualifying Public Benefit Entities (QPBE), Qualifying Investment Funds (QIF) are also eligible for the penalty waiver. Such exempt persons should submit their annual declaration within 7 months from the end of their first financial year.

A common query amongst the business community is on the requirement to deposit corporate tax early along with the tax return, if submitted within the stipulated seven months.

The FTA has categorically clarified that the penalty waiver does not affect the deadline to deposit the tax payable. The tax could still be paid within nine months from the end of the tax period.

A taxpayer is not required to make a formal application to FTA for the penalty waiver. The waiver will be applied automatically once the tax return is submitted within the stipulated 7 months period. The waiver is applicable whether or not the taxable person has submitted a reconsideration application against the penalty.

The unpaid penalty will be waived automatically on Emaratax. If the penalty has been paid, Dh10,000 will be automatically credited to the corporate tax account (distinct from VAT account) on Emaratax. The taxable person could either utilise the amount so refunded against the corporate tax payable or seek a refund. 

Companies incorporated on or after March 1, 2024 should register for corporate tax within three months from the date of incorporation. Many newly established businesses – including those established in 2025 - have received administrative penalties on missing out to register on time.

Businesses often miscount the three months period. To illustrate, for a company incorporated on  January 15, 2025, the time-limit of 3 months start from January 15, 2025 and not from end of January 2025.

The public clarification states that the penalty waiver initiative only applies to the first tax period, whether in the past or in the future. The reference to future first tax period provides hope to newly incorporated companies to receive the penalty waiver in 2026.

Where an entity has received a late registration penalty and has subsequently become a member of a corporate tax group, the penalty waiver can still be applicable. In such cases, the tax return for the tax group should be submitted within 7 months from the end of the tax period.

The waiver initiative is a welcome step providing a much needed financial relief and encourage tax compliance.  Businesses should ensure to avail the benefit of the penalty waiver scheme.