Breaking News: FTA UAE Offers Penalty Waiver for Late Corporate Tax Registration
May 7, 2025
Breaking News: FTA UAE Offers Penalty Waiver for Late Corporate Tax Registration
The federal tax authority has launched a new initiative to support businesses and encourage compliance with the UAE tax system. The FTA organises this waiver to help companies, including startups, SMEs, and exempt entities, meet their tax obligations. Under this initiative, the AED 10,000 administrative penalties for late corporate tax registration can be waived if the taxpayer submits the required tax return or annual declaration within seven months from the end of the first tax period. This applies whether the penalty has been paid or not. If the penalty was already paid, the amount will be refunded to the taxpayer’s tax account.
This move is designed to make it easier for all business sizes to comply with the new corporate tax rules. The waiver covers those who have not registered yet, those who registered late, and even those who have already paid the penalty. To benefit, businesses must complete registration and submit their tax returns or annual declarations on time using the EmaraTax platform. This step by the federal tax authority is part of ongoing efforts to support businesses and simplify the tax system, reducing the burden of administrative penalties and helping companies fulfil their tax obligations.
Key Conditions to Benefit from the Penalty Waiver
Entities must register for corporate tax with the Ministry of Finance and file their corporate tax return within seven months from the end of their first tax period to qualify for the late registration penalty waiver. For example, if the tax period ends on December 31, 2024, the deadline to register for corporate tax and file the return is July 31, 2025.
The waiver is available to all businesses required to register for corporate tax, including taxable businesses, exempt entities, free zone companies, and mainland entities with active licences. These entities must submit their tax registration applications within the required timeframe to qualify for the waiver.
If a business has already incurred a penalty for late registration but has not yet paid it, the penalty will be waived if the business submits a valid corporate tax return or annual declaration within seven months from the end of the first tax period.
If a business has already paid the penalty for late registration but has not yet submitted the tax return, the business must still submit the tax return or annual declaration within the seven-month window. Once this is done, the amount paid will be refunded to their tax account. If a business has already paid the penalty and has also submitted the tax return within the seven-month period, the paid penalty will be refunded to their tax account. This ensures that compliant businesses are not penalised for late registration if they meet the new filing conditions.
If a business has not yet submitted a corporate tax registration application, it must register for corporate tax and submit the tax return or annual declaration within the seven-month period to qualify for the waiver. If a penalty is imposed, it will be waived upon meeting these conditions.
Maintaining accurate documentation is essential. Businesses must keep proper bookkeeping and accounting records to ensure that their filings are correct and complete. Accurate financial statements are required to support the corporate tax registration application and tax return.
Missing the seven-month filing window means the business will not qualify for the waiver. In such cases, administrative penalties may apply, with fines up to AED 10,000 for the first violation and AED 20,000 for subsequent violations.
Understanding UAE Corporate Tax Registration
The UAE introduced a new corporate tax law for financial years starting on or after June 1, 2023. This tax legislation requires businesses and certain individuals to register for and pay corporate tax on their profits. The law is part of the UAE government’s efforts to align with international tax regulations and standards, and it is separate from other taxes like excise tax. All companies, whether on the mainland or in free zones, must register for UAE’s corporate tax, regardless of their annual profits.
Entities required to register include resident persons, such as companies incorporated in the UAE or those effectively managed and controlled in the UAE. Non-resident persons must also register if they have a permanent establishment in the UAE or if they earn UAE-sourced income. Natural persons, meaning individuals, are subject to corporate tax registration if they conduct business or professional activities in the UAE and their annual turnover exceeds AED 1 million.
There are clear deadlines for corporate tax registration. Companies incorporated before March 1, 2024, must register based on the month their licence was issued, with deadlines ranging from May 31, 2024, to December 31, 2024. Companies incorporated on or after March 1, 2024, must register within three months from the date of incorporation. For natural persons who exceed the AED 1 million turnover threshold in 2024, the deadline is March 31, 2025. For those exceeding the threshold in later years, registration is due by March 31 of the following year.
To register for corporate tax, businesses and individuals must use the EmaraTax portal, which provides digital tax services. The process involves creating an account, entering entity and identification details, adding business activities and owners, providing contact details, and designating an authorised signatory. After reviewing and submitting the application, a reference number is generated for future communication with the Federal Tax Authority.
Different scenarios can affect whether a person is subject to corporate tax. For example, a shareholder in a UAE joint stock company who does not run an independent business is not required to register. However, an individual selling software with sales above AED 1 million or running a car rental business with high turnover must register. Income from personal investments or selling personal assets is not subject to corporate tax, nor is rental income from real estate investments for individuals.
The Importance of Timely Corporate Tax Registration
The importance of timely corporate tax registration is clear for both natural and juridical persons conducting business activities in the country. The Federal Tax Authority (FTA) has set strict deadlines based on the date of company incorporation or licence issuance. Missing these deadlines leads to an administrative penalty of AED 10,000.
Timely registration ensures compliance with the law and is the first step towards fulfilling all corporate tax obligations. It also allows businesses to operate smoothly within the legal framework, avoiding disruptions that could arise from non-compliance. Prompt registration shows a commitment to the law and helps maintain a good standing with authorities, reducing the risk of increased scrutiny from the FTA.
Businesses that register on time can also access potential benefits and exemptions, such as claiming tax reliefs or qualifying for penalty waivers. For instance, if a business misses the initial registration deadline but submits its tax return within seven months from the end of the first tax period, it may qualify for a penalty waiver. Exempt entities must also submit annual declarations within the same timeframe to avoid penalties.
Act Now to Benefit from the Waiver and Ensure Compliance
The FTA’s penalty waiver for late corporate tax registration is a valuable opportunity for businesses in the UAE. Companies that missed the registration deadline can now avoid the AED 10,000 late penalty if they register and file their first corporate tax return within seven months from the end of their first tax period. It is important for every business to understand these conditions and act within the set timeframe to benefit from this relief.
Businesses that register and file on time not only avoid penalties but also build a strong foundation for future compliance. Timely corporate tax registration supports smooth business operations and helps maintain a good standing with the authorities for long-term success in the UAE. If you need help with corporate tax registration, contact us at RSN Finance for expert support.
Frequently Asked Questions
The initiative to waive the penalty for late corporate tax registration allows businesses that missed the deadline to avoid the AED 10,000 penalty if they submit their tax returns or annual statements and complete their tax registration applications for corporate tax within seven months from the end of their first tax period, as per the new corporate tax legislation in the United Arab Emirates.
All businesses and exempt entities required to register for corporate tax in the United Arab Emirates, including those who have already paid or not paid the penalty for late registration, can benefit from this penalty waiver if they file their tax returns or annual statements and submit their tax registration applications for corporate tax within the required timeframe.
To benefit from this penalty waiver, businesses must submit their tax registration applications for corporate tax and file their tax returns or annual statements within seven months from the end of their first tax period, following the requirements for the initiative set by the corporate tax legislation in the United Arab Emirates.
Yes, if a business has already paid the penalty for late corporate tax registration but meets the requirements for the initiative by filing its tax returns or annual statements within seven months from the end of the first tax period, the penalty amount will be refunded to their tax account in the United Arab Emirates.
If a business does not file their tax returns or annual statements within seven months from the end of the first tax period, it will not benefit from this penalty waiver and will be subject to the full penalty for late corporate tax registration under the corporate tax legislation in the United Arab Emirates.
RSN Finance can assist businesses in the United Arab Emirates by guiding them through the process of submitting tax registration applications for corporate tax, filing tax returns or annual statements, and ensuring all requirements for the initiative to waive the penalty for late corporate tax registration are met so that businesses can benefit from this penalty waiver and stay compliant with corporate tax legislation.
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