Penalties for Late or Incorrect Corporate Tax Returns in the UAE
Corporate tax is here — and it’s serious business.
The UAE’s tax regime may be new, but the rules are firm. If you’re running a company, you’re expected to play by them.
Late filings? Mistakes in tax return? They’re not just paperwork issues anymore. They trigger penalties. And in some cases, big ones.
In today’s regulatory climate, being late or careless can cost you not just money but also credibility.
This article breaks it all down.
Latest Update: Penalty Relief for First-Time Filers (2025)
Here’s the thing. If you’re filing your first corporate tax return in the UAE, the government’s giving you a bit of room to breathe.
As of April 2025, there’s temporary relief in place. File your first return within seven months after your tax period ends, and you won’t get hit with late filing or correction penalties.
But don’t confuse this with a free pass. It’s a one-time cushion, not a habit to build.
So, who qualifies?
Anyone filing their very first UAE corporate tax return. Doesn’t matter if you’re a mainland company or in a free zone. You’re covered if it’s your first go and you’re on time.
Wondering what does “on time” mean?
Let’s break it down:
Say your tax year ends 31 December 2024. You need to file your return by 31 July 2025.
If you do it by then? No penalties. But if you file on 1 August? You’re late.
Relief gone. Simple.
Don’t mix this up with registration
Filing a return is not the same as registering for corporate tax. That’s a separate deadline and a separate penalty if you miss it. This relief only applies to tax return submission, not registration.
What this really means is that the grace period is real but limited. It buys you a little time, not immunity.
So use it well.
Standard Penalties for Late or Incorrect Corporate Tax Returns
The UAE isn’t playing around with corporate tax. You’re expected to file, pay, and report things accurately. If you don’t, you’ll pay for it, literally.
Let’s break it down.
Late filing of tax returns
If you miss your tax return deadline, the FTA starts charging you monthly:
- AED 500 per month for the first 12 months
- AED 1,000 per month if you’re still not filed after that
Even if you’re just one day late, it counts as a full month. The meter starts ticking immediately.
So if you file 13 months late, that’s AED 11,000 in fines. All for something that could’ve been done online in a few clicks through FTA eServices.
Late payment of corporate tax
Filing is one thing. Paying what you owe is another.
If you file on time but don’t pay, the FTA charges 14% annual interest on the unpaid tax in the UAE. This is calculated monthly.
So every month you delay, your unpaid UAE income tax grows. Slowly, then suddenly.
Not keeping accurate financial records
This one gets people into trouble.
If your books are incomplete, sloppy, or missing, you’ll be fined:
- AED 10,000 the first time
- AED 20,000 if you do it again within 2 years
Your records don’t need to be fancy. But they must be complete, current, and match what you report in your income tax return.
Filing the return incorrectly
Made a mistake in your income tax return filing? There’s an AED 500 fine, unless you correct it before the deadline.
That’s the key. You’re fine if you catch it early and fix it in time. But if the FTA finds it after the deadline, it’s a penalty.
Not reporting changes to your tax info
If your business details change, like switching legal form, changing your tax period, or restructuring, you’re supposed to report that.
If you don’t:
- It’s AED 1,000 per violation
- AED 5,000 if it happens again within 2 years
Log in to Eservices FTA to update your information. It takes five minutes, but skipping it could cost you much more.
Refusing to cooperate during a tax audit
If the FTA asks for your records or sends auditors, you need to cooperate. If you ignore them or withhold documents, you’ll get hit with an AED 20,000 fine.
It’s not about whether they like your numbers but about transparency.
Tax evasion
This is the big one.
If the FTA believes you’re hiding income, faking invoices, cooking the books, or doing anything intentionally to avoid paying federal tax, that’s tax evasion.
There’s no fixed fine for this. It depends on the case, but it’s serious:
- You could face massive fines
- They could freeze or suspend your license
- You might end up in court
This isn’t a late fee situation. It’s criminal behavior, and it’s treated that way.
Voluntary Disclosure: Fixing Mistakes Before They Cost You
Let’s be honest. Mistakes happen. You might miscalculate, enter the wrong figure, or leave something out. The key is what you do next.
If you spot an error in your ITR filing after it’s been submitted, the FTA gives you a chance to correct it through voluntary disclosure.
Here’s how it works:
You log into FTA eServices, file a voluntary disclosure form, and fix the mistake. It’s straightforward, no explanations needed.
But here’s the catch:
If the correction results in more corporate tax owed, and you delay the disclosure, the penalties start to build.
What kind of penalty?
- 1% per month
- On the difference between what you originally paid and what you should have paid
So, let’s say you underpaid by AED 10,000 and only caught the mistake five months later. That’s AED 500 in fines, just for the delay.
Wait longer, and it gets worse.
Why timing matters?
Correcting the error before the FTA notices makes the penalty smaller. You’re showing good faith and cooperating, and that goes a long way.
If they find it first?
Now you’re not just wrong, you’re also late. And that can push you into higher penalties or even trigger an audit.
Compliance Best Practices for UAE Businesses
If you want to avoid penalties, you need more than good intentions. You need systems that work, people who understand the rules, and the discipline to stay ahead.
Here’s what that looks like in practice:
1. Stay informed
The FTA eServices and the Ministry of Finance don’t make quiet changes. When something shifts; deadlines, relief programs, reporting rules, they announce it. But you have to be paying attention.
Check their official channels regularly. Subscribe to alerts. Make it someone’s job to track updates.
2. Keep your records clean, and keep them for five years
You’re legally required to hold onto financial records for at least five years. That includes invoices, receipts, bank statements, and anything else tied to your tax return.
Don’t wait for an audit to start organizing. By then, it’s too late.
3. Use proper accounting software
Trying to track corporate tax on Excel? Risky.
Use accounting tools that calculate tax, generate reports, and remind you of due dates. Better yet, pick one that connects directly with eservices fta.
Technology doesn’t eliminate errors, but it does reduce them, especially when deadlines start stacking up.
4. Work with tax professionals
You don’t need to hire an in-house tax team. But you should have someone who knows the law, understands your numbers, and can flag risks early.
This is especially important before your first ITR filing, or if your business structure isn’t simple.
5. Train your team
If only one person understands the tax in the UAE rules, that’s a single point of failure. Make sure your finance, operations, and admin teams all understand the basics of what’s required.
Short sessions. Clear rules. Written procedures. It’ll save you headaches later.
Impact of Non-Compliance: Financial and Reputational Risks
Let’s not sugarcoat it. UAE income tax non-compliance isn’t just about paying fines. It’s about what those fines do to your business, over time, and in public.
The money adds up
One missed filing? That’s a few thousand dirhams. But stack that with late payments, incorrect returns, and missing records, and suddenly you’re bleeding cash every month, not because your business is failing, but because your compliance is.
Fines eat into profit. Interest compounds. Penalties pile up. And all of it could’ve been avoided.
The reputation hit is worse
Once you’re flagged as non-compliant, it’s hard to shake off.
Banks hesitate. Investors get nervous. Partners start asking questions. And when word gets around that your income tax return isn’t in order, the damage goes far beyond your balance sheet.
You don’t want your business name associated with negligence, especially not in a region where trust and transparency carry real weight.
It can get serious
Ignore the rules long enough, and it doesn’t just cost you money. It can cost you your business.
The FTA has the power to escalate:
- Freeze your accounts
- Suspend your trade license
- Take legal action
At that point, it’s not about cleaning up a spreadsheet. It’s about fighting to stay operational.
Build the right culture now
This is where smart businesses separate themselves. The ones that take federal tax compliance seriously don’t just avoid trouble, they build credibility.
When compliance becomes part of your internal culture, you stop reacting to rules. You stay ahead of them. That mindset pays off, year after year.
How ADEPTS Can Help Your Business Stay Compliant
Tax return compliance in the UAE isn’t just about filling out forms. It’s about knowing what’s required, doing it right, and staying ready, even when the rules shift.
That’s where ADEPTS comes in.
We specialize in UAE corporate tax compliance. That includes helping businesses register, file accurately, correct mistakes, and respond to the FTA when needed.
Here’s how we can support you:
- Tailored tax solutions — from registration to income tax return filing to voluntary disclosures
- Direct support with FTA eServices — so you never miss a notice or misread a requirement
- Clean, audit-ready record-keeping systems — built to match your workflows
- Ongoing advisory and training — to help your team understand the rules and avoid repeat mistakes
More importantly, we work proactively. We don’t wait for penalties to hit. We help you get ahead of the risks and stay compliant without stress.
Because staying compliant shouldn’t feel like a scramble, it should feel like business as usual, calm, clear, and under control.
Conclusion
Corporate tax in the UAE is no longer optional, and it’s not something you can afford to get wrong.
Timely filing. Accurate reporting. Clean records. These aren’t just checkboxes, they’re the difference between smooth operations and mounting penalties.
The rules are clear, and the fines are real. But with the right support, compliance doesn’t have to be stressful.
ADEPTS helps you stay ahead with expert guidance, smart systems, and ongoing support that keeps you penalty-free and audit-ready.
Got questions? Facing deadlines? Let’s make sure your next move is the right one.
FAQs:
You’ll be fined. The AED 10,000 penalty is applied automatically once the waiver window closes. There are no extensions and no exceptions after that point.
Yes. The FTA allows formal reconsideration requests, but you’ll need to present a clear explanation and supporting documents. The sooner you act, the stronger your case.
Yes. If your business is subject to the corporate tax regime, the same rules and penalties apply regardless of your location.
Through your FTA eServices account and your registered email. If you’re not checking both regularly, you could easily miss critical updates.
Keep everything: tax return, financial statements, invoices, contracts, bank records, and any FTA correspondence. Store these securely for at least five years — they’re your first line of defense.
Yes. We handle the entire process — from preparing waiver applications to responding to FTA notices. We ensure your tax return communication stays clear, professional, and timely.
Resources
Authority, Federal Tax. ‘Federal Tax Authority – United Arab Emirates’. Federal Tax Authority United Arab Emirates, https://tax.gov.ae//en/.
—. ‘Service Cards’. Federal Tax Authority – Services, https://tax.gov.ae//en/services.aspx.
Federal Tax Authority – Filing Returns And Payment. https://tax.gov.ae/en/taxes/excise.tax/excise.tax.topics/filing.returns.and.payments.aspx.
Federal Tax Authority – Waiver Of Penalties. https://tax.gov.ae/en/about.fta/waiver.of.penalties.aspx.
Tax Return. https://tax.gov.ae/Datafolder/Files/Guides/CT/CT-Returns-EN-11-11-2024.pdf.
UAE Enforces a 14% Annual Penalty on Unpaid Corporate Taxes – Finance Middle East. 27 Jan. 2025, https://www.financemiddleeast.com/tax/uae-enforces-a-14-annual-penalty-on-unpaid-corporate-taxes/.
United Arab Emirates Legislations | Federal Decree by Law Concerning Tax Procedures. https://uaelegislation.gov.ae/en/legislations/1625
‘United Arb Emirates – Ministry of Finance-AR’. Ministry of Finance – United Arab Emirates, https://mof.gov.ae/.
Voluntary Disclosure User Guide. https://tax.gov.ae/-/media/Files/EN/PDF/Guides/Voluntary-Disclosure-user-guide-English.pdf.
