The Ministry of Finance (“MoF”) published Cabinet Decision No. 75 of 2023, adopted by the UAE’S Federal Cabinet, outlining the Administrative Penalties for Violations of the Corporate Income Tax legislation. This new Decision is set to be effective from August 1, 2023. We’ve incorporate our own insights based on this Cabinet Decision. Read on to know more.
The following penalties apply for different violations related to CT compliance:
These are the same penalties as for VAT and Excise Tax violations.
This is a different penalty than for VAT and Excise Tax violations, where the penalty is AED 5,000 for the first-time violation and AED 10,000 in case of repetition.
This is a different penalty than for VAT and Excise Tax violations, where the penalty is AED 10,000, and the penalty is due from the Legal Representative’s funds.
This penalty is marginally lower than the failure to submit a VAT and Excise Tax return, which attracts a penalty of AED 1,000 for the first violation, and AED 2,000 for any subsequent violations.
This somewhat intriguing formulation presumably means that the penalty will be prorated per month, which would result in a monthly penalty of 1.17%. This is comparably high and does more than just compensate for the value of money over time (even with high inflation). It also does not mention the starting date from which the penalty applies, presumably the filing due date of the CT return.
This again is different from VAT and Excise Tax, where the late payment penalty could potentially not apply in case of a Voluntary Disclosure before being notified of an audit and settling the VAT or Excise Tax on time (we note another penalty may be applied though which can range from 5 to 40%).
This penalty is again marginally lower than the failure to submit a VAT and Excise Tax return, which attracts a penalty of AED 1,000 for the first violation, and AED 2,000 for any subsequent violations.
Presumably, this penalty would not apply when the taxable person incurs a loss, and there’s a negative change to the loss (i.e. after correction, there are more tax losses). It will remain to be seen what will happen to a change in loss, where after the correction, there are fewer tax losses (e.g. a company recorded a tax loss of 100, and after correction, it’s only 50). The described situation, in regard to losses, does require the compulsory submission of a Voluntary Disclosure.
The penalty provision is not comparable to VAT and Excise tax, where the equivalent penalty would range from 5 to 40%, and is also time-dependent but structured in a different manner. We encourage readers to check out our webinar, where we covered the 2021 changes to the UAE penalties regime for VAT and Excise Tax.
To write this provision in a positive way, it describes the penalties applicable to a business after it has been notified of an audit and it has not submitted a Voluntary Disclosure.
The penalty provision is not comparable to VAT and Excise tax, where the equivalent penalty would be 50% for violations detected during an audit. For VAT and Excise Tax, there is an additional penalty of 4% per month from the due date of the tax for the relevant tax return until the issuance of the Tax Assessment.
This provision is the same as for VAT and Excise Tax and is the exceptional stick the FTA will use in case of non-cooperation.
This may be applicable to a range of requirements, such as the declaration to be filed on behalf of the partners in an unincorporated (transparent) partnership or the declaration to request for an exemption of CT (e.g. for a qualifying public benefit entity, a qualifying investment fund, a public pension or social security fund).