Corporate tax penalties, and how to get them waived

The corporate tax penalty regime is set out in cabinet decision and administered by the FTA. Late registration attracts AED 10,000. Late deregistration attracts AED 1,000 rising monthly to a cap of AED 10,000. Late filing of a return carries its own escalating penalty. Late payment attracts a percentage charge that increases the longer it remains outstanding. Submitting an incorrect return, failing to keep required records, and failing to provide information to the FTA on request each carry separate penalties.

Two things are worth knowing beyond the amounts. The first is that voluntary disclosure — telling the FTA about an error before they find it — generally produces a materially better outcome than waiting, and the difference is large enough that it should be the default response to discovering a mistake. The second is that the FTA has operated waiver initiatives, most notably remitting the late-registration penalty for taxable persons who file their first return within seven months of the end of the first tax period. These are initiatives with their own deadlines rather than permanent features, so the current position has to be checked rather than assumed.

Thresholds and deadlines

Late registration

AED 10,000

Late deregistration

AED 1,000 per month, capped at AED 10,000

Late filing

Escalating penalty per period of delay

Late payment

Percentage charge, increasing over time

Incorrect return

Separate penalty; reduced by voluntary disclosure

Waiver initiatives

Have applied to late registration — check the current position

1. Establish exactly which penalty appliesThey have different triggers and different remedies, and the advice for one does not transfer.
2. File the outstanding item immediatelyMost penalties escalate with time. The single most effective action is usually to file, even late.
3. Use voluntary disclosure for errorsDisclosing before the FTA identifies an error generally produces a materially better outcome than being found out.
4. Check whether a waiver initiative appliesThey have existed, they have conditions, and they have deadlines.
5. Fix the process that caused itA missed deadline is almost always a calendar problem rather than a knowledge problem.

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