The UAE Federal Tax Authority (FTA) has announced the decision to exempt certain categories of taxpayers from administrative penalties for late registration for Corporate Tax.
The initiative aims to support the UAE business sector by encouraging taxpayers to voluntarily comply with their tax obligations. The Director-General of the FTA also highlighted the positive trend in corporate tax registrations during the first quarter of 2025, noting that the total number of taxpayers registered for corporate tax in the UAE has already reached 543,000.
The corresponding press release was published on the FTA’s website on 7 May 2025.
Taxpayers concerned
The exemption applies to all persons required to register for corporate tax in the UAE, primarily:
- legal persons incorporated under the UAE laws, including free zone companies and
- individuals carrying out business activities in the UAE.
The exemption is available for taxpayers who submitted their tax registration application late and those who did not submit the application at all, provided that certain conditions are met.
How to avoid the penalty?
To benefit from the exemption, a taxpayer must file a corporate tax return within seven months of the end of their first tax period (instead of nine months under the general rule). This applies only to the first tax period of the taxable person.
It does not matter whether the due date for filing the first tax return falls before or after the implementation date of the said penalty relief decision.
Additionally, the FTA has stated that if a taxpayer has already paid a penalty for late tax registration but meets the requirement for the exemption, that penalty will be refunded to the taxpayer’s account with the FTA.
Cases where the exemption applies
In its clarification, the FTA outlined several cases in which a taxpayer could benefit from an exemption from the penalty or receive a refund.
| Case | What to do to be exempt from the penalty? |
|---|---|
|
A. The taxpayer is registered for tax but has been assessed a late penalty, which remains unpaid. |
The tax return must be filed within seven months of the end of the first tax period. |
|
B. The taxpayer is registered for tax, has been assessed a late penalty, and has paid it. |
The tax return must be filed within seven months of the end of the first tax period. In this case, the FTA will refund the penalty amount that was paid. |
|
C. The taxpayer did not submit a tax registration application. |
To comply, the taxpayer must submit the registration application first, followed by filing the tax return within seven months of the end of the first tax period. |
A penalty for failure to register for corporate tax
Any company in the UAE, including those in free zones, incorporated on or after 1 March 2024 is required to submit a corporate tax registration application within three months of its incorporation date. This requirement applies regardless of whether the company is registered for VAT.
The Cabinet Decision No. 75 of 2023 (as amended effective from 1 March 2024) provides for penalties for violations related to the application of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
Failure of the taxable person to submit a tax registration application within the timeframe specified by the Federal Tax Authority in accordance with the Corporate Tax Law entails an administrative penalty of 10,000 AED (approximately 2,700 USD).
Conclusions
In light of the tax authorities’ decision to temporarily waive penalties, UAE companies that have not yet registered for corporate tax have the opportunity to do so without penalties.
To qualify for this penalty waiver, companies must submit a corporate tax return within the reduced seven-month period.
If you have any questions or are considering setting up a business in Dubai, the Uniwide team is here to assist you. We can help you:
- Understand whether your company needs to register for corporate tax in the UAE,
- Evaluate your case regarding deadlines and potential penalties, and
- Ensure ongoing tax compliance.