Penalties in the UAE tax system are mechanical. They are not judgements about whether you meant well, and they apply from the day a deadline passes. The good news is that several can be reduced or removed, and the process for doing so is defined.
The penalties businesses meet most often
- Late corporate tax registration: AED 10,000
- Late VAT registration: AED 10,000
- Late corporate tax return: AED 500 per month for the first twelve months, then AED 1,000 per month
- Late VAT return: AED 1,000 for the first, AED 2,000 for a repeat within 24 months
- Late de-registration, VAT or corporate tax: AED 1,000, then AED 1,000 each month, up to AED 10,000
- Failing to keep the FTA informed of changes to your details: administrative penalties apply
The corporate tax registration waiver
The FTA has waived the AED 10,000 late registration penalty for large numbers of businesses that filed their first corporate tax return within seven months of the end of their first tax period. If you registered late, filing quickly is not just about avoiding more penalties: it can be what removes the existing one. Businesses that already paid a penalty they later qualified to have waived can receive a credit on their account.
Reconsideration requests
If you believe a penalty was applied incorrectly, you can ask the FTA to reconsider. The request has to be submitted within the time limit set in the Tax Procedures rules, in the required form, with the evidence attached. What decides these cases is documentation, not explanation: proof of what happened and when, rather than a description of intentions.
Voluntary disclosure beats being found
Correcting your own error before the FTA finds it consistently costs less than waiting. A voluntary disclosure carries a penalty, but it is far smaller than the one that follows an assessment after an audit.
Stop the clock first
Many penalties increase monthly. Before arguing about an existing penalty, file the missing return or submit the pending application, because that stops the amount growing while the rest is sorted out.
Questions we are asked about this
Can all penalties be waived?
No. Waivers and reconsiderations apply in specific circumstances, with evidence. Anyone promising to remove any penalty is not being straight with you.
I paid a penalty that I now think qualified for a waiver. Is it lost?
Not necessarily. Where a waiver applies and the penalty was already settled, the amount can be credited to your tax account. It is worth checking your position.
How long do I have to request reconsideration?
There is a strict deadline that runs from the date you were notified. Do not let it pass while you gather documents: start the process early.
Need help with this? VATAXSYS, VAT and Tax Consultant, handles corporate tax registration for businesses across the UAE. Call +971 55 240 3135 or message us on WhatsApp for a free consultation.