The UAE Set Penalties for Corporate Tax Law Violations
The UAE Ministry of Finance has published Cabinet of Ministers Resolution No.75 of 2023, which sets penalties for violations of Corporate Tax Law No.47 of 2022. The schedule of offenses and corresponding penalties includes 13 items.
The main points of this schedule are given below:
- If a taxpayer fails to comply with the Voluntary Disclosure procedure (fails to file a revised calculation) prior to a tax audit notice, the following penalties apply:
1) 15% of the unpaid tax amount; and
2) 1% of the unpaid tax amount per month (or part thereof) as follows:
– if a Voluntary Disclosure is made after a tax audit notice, the penalty shall be imposed for the period from the day following the date of filing of the relevant tax return or the date of filing of the tax refund application or the date of tax audit notice and up to the date of Voluntary Disclosure;
– if a Voluntary Disclosure has not been made, the penalty shall be imposed for the period from the day following the date of filing of the relevant tax return or the date of filing of the tax refund application or the date of tax audit notice and up to the date of completion of the tax audit.
- AED 10,000 and AED 20,000 (in case of repeated violations within 2 years) – penalty for violation of requirements for retention of accounting and primary documents.
- AED 5,000 – penalty for failure to provide documents requested by tax authorities.
- Late filing penalty: AED 500 per month during the first 12 months and AED 1,000 per month starting from the 13th month.
- Late payment penalty: 14% per annum of the unpaid tax amount for each month of delay or part thereof.
As a reminder, the maximum penalty is set by UAE Federal Law on Tax Procedures No.28 of 2022, which says that the amount of any administrative penalties for tax law violations shall not exceed 200% of the unpaid tax amount (both in respect of VAT and income tax).
Criminal liability applies in case of:
- Intentional tax evasion – in the form of imprisonment and/or a penalty of not more than 300% of the unpaid tax amount.
- Intentional provision of false information, concealment or destruction of documents – imprisonment and/or a penalty not exceeding AED 1 million.
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