Which corporate tax penalties apply in the UAE and what triggers each one?

UAE corporate tax penalties are specific and substantial. For late registration, the penalty is AED 10,000. Missing a tax return deadline results in a penalty of AED 500 for each month or part month for the first 12 months, then AED 1,000 for each month or part month from the thirteenth month. Late payment incurs a monthly penalty at a rate of 14% per year on the unpaid tax, for each month or part month. The Federal Tax Authority also applies penalties for submitting incorrect tax returns. Below is a table outlining the penalties, how much each costs and what triggers them.

Corporate tax penalties at a glance

When these penalties apply

Late registration

If a taxable business fails to register for corporate tax by its assigned deadline from the Federal Tax Authority, a one-time penalty of AED 10,000 is imposed. This applies even if the business has no tax payable.

Late filing of corporate tax returns

Any return submitted after the filing deadline attracts a penalty. The charge is AED 500 for each month, or part of a month, past the due date for the first 12 months, then AED 1,000 for each month or part of a month from the thirteenth month, until the return is filed. For example, filing 10 days late triggers a full AED 500 charge; filing five weeks late amounts to AED 1,000.

Late payment of corporate tax

If the tax is unpaid by the due date, a monthly penalty at a rate of 14% per year is charged on the unpaid amount, for each month or part of a month, from the day after the due date and on the same date each month after that.

Incorrect corporate tax returns

Submitting an incorrect tax return carries a fixed penalty of AED 500, unless the return is corrected before the filing deadline. Where the error understates the tax due, further penalties apply to the difference: a monthly penalty of 1% where the business corrects it through a voluntary disclosure, and a fixed 15% plus the monthly 1% where it does not disclose before being notified of a tax audit.

Practical implications for businesses

Penalties for late registration and late filing are fixed and easy to calculate. The late payment penalty, however, accumulates for each month or part month that payment is late and is based on the outstanding amount. An incorrect return carries a fixed AED 500 penalty unless it is corrected before the filing deadline, and errors that understate the tax due attract further penalties on the difference, so correcting early through a voluntary disclosure keeps the cost down.

The FTA allows for the possibility of administrative penalty waivers in certain circumstances, but businesses must submit a formal request and support their case.

Reference table: corporate tax penalties

Clear communication with accounting and timely follow-through on every corporate tax process step are essential to avoid accumulating these penalties.