Understanding the AED 10,000 Penalty for Late Corporate Tax Registration in the UAE
Overview
In 2022, the United Arab Emirates (UAE) introduced Federal Decree-Law No. 47 of 2022, establishing a corporate tax system applicable to businesses operating within the country. This law mandates that entities meeting specific criteria register for corporate tax with the Federal Tax Authority (FTA) otherwise administrative penalties will be imposed on Taxable Persons who do not submit their registration applications for Corporate Tax within the timeframes specified in the FTA’s Decision for each segment of Taxable Persons.
Basis of Taxation
- They Conduct Business or Business Activity in the UAE; and
- Total Turnover derived from Business or Business Activities exceeds AED 1 million within the calendar year (Jan to Dec)
- Wages
- Personal Investment Income
- Real Estate Investment Income
- The juridical person is residente
Incorporated under the laws of the UAE
- Under mainland legislation or applicable free zone regulations
- Also includes juridical persons created by a specific statute / decree
Foreign incorporated but effectively managed and controlled in UAE
- Needs to be determined with regard to specific facts and circumstances
- One of the key factors being where key management and commercial decisions related to strategic and policy matters necessary for the conduct of the company’s business are regularly and predominantly made in the UAE
- The juridical person is non-resident (incorporated or formed outside the UAE and not effectively managed and controlled in the UAE) only when:
- They have a Permanent Establishment in the UAE, which is any fixed place of Business or any other form of presence in the UAE.
- They derive State-Sourced Income (income accruing in or derived from the UAE according to the Corporate Tax Law).
- They have a nexus in the UAE, meaning if they earn income from Immovable Property in the UAE, such as a plot of land, a building, fixtures, or equipment that constitute a permanent part of the land or is permanently attached to a building or structure.
Corporate Tax Registration Deadlines and Grace Period
The Federal Tax Authority (FTA) has set very specific deadlines for corporate tax registration in 2024. These deadlines are crucial for compliance.
A juridical person that is a Resident Person incorporated, established, or otherwise recognised prior to 1 March 2024 must apply to register for Corporate Tax within the following timeframes:
| Month of License Issuance The year the license was issued is irrelevant | Deadline to apply for Corporate Tax Registration |
| January or February | May 31, 2024 |
| March or April | June 30, 2024 |
| May | July 31, 2024 |
| June | August 31, 2024 |
| July | September 30, 2024 |
| August or September | 31 October 2024 |
| October or November | 30 November 2024 |
| December | 31 December 2024 |
If a juridical person does not have a license by the Decision’s effective date on 1 March 2024, they must apply to register within three months i.e. by 31 May 2024. Meanwhile, if the juridical person holds multiple licenses, the deadline to apply for registration is based on the prior issued license to determine the maximum timeframe to submit the Corporate Tax registration application.
For resident juridical persons that are incorporated, established or recognised on or after
1 March 2024, the following timelines will apply:
A juridical person that is a Resident Person (incorporated, established, or otherwise recognised under the applicable legislation of a foreign jurisdiction that is effectively managed and controlled in the UAE – 3 months from the end of the Financial Year of the person.
Timeline for Non-Resident Juridical Persons
| Category of juridical persons | Deadline for submitting Tax Registration Application |
| A person that has a Permanent Establishment (“PE”) prior to 1 March 2024 | 9 months from the date of existence of the PE |
| A person that has a nexus prior to 1 March 2024 | 3 month starting from 1 March 2024 |
| A person that has a PE on or after 1 March 2024 | 6 months from the date of existence of the PE |
| A person that has a nexus on or after to 1 March 2024 | 3 months from the date of establishment of the nexus |
Timeline for Natural Persons
- A Resident Person – 31 March of the subsequent Gregorian calendar year where Business or Business Activities took place;
- A Non-Resident Person – within three months from the date of fulfilling the conditions set out to be a Taxable Person.
Steps to Ensure Timely Compliance in 2025
Late corporate tax registration is nothing but a cause of penalties, unnecessary stress, and legal issues. Here are some steps for you to help you make sure that you meet the deadlines, file the correct documents, and stay compliant with the Federal Tax Authority:
Know Your Deadline: The Federal Tax Authority (FTA) has set specific registration timelines.
For example, Natural Persons or individuals conducting business activities whose total turnover exceeds AED 1 million in a calendar year must register for corporate tax before March 31, 2025, to avoid administrative penalties.
Prepare Your Documents: The second most crucial step, which tends to take time, is to ensure all necessary information is accurate and complete before submitting through the FTA’s portal.
Prepare Your Documents: The second most crucial step, which tends to take time, is to ensure all necessary information is accurate and complete before submitting through the FTA’s portal.
Required Documents and Forms
● Trade license, where applicable
● Emirates ID / Passport of the applicant
● Trade license
● Emirates ID / Passport of authorized signatory
● Proof of authorization for the authorized signatory.
Seek Professional Assistance: Navigating tax regulations is not easy and we understand that. Therefore it is suggested to consider consulting a tax professional like Adpets to help you through the registration process and ensure full compliance. Adpets offers professional taxation services that ensure you stay compliant with the authorities and do not miss any deadlines.
Consequences of Non-Compliance
Conclusion
FAQs
Yes, corporate tax registration is mandatory for all businesses, regardless of income level. However, the 0% tax rate applies to taxable income up to AED 375,000.
Exception: Natural Persons only need to register if they Conduct Business or Business Activity in the UAE and the total turnover derived from Business or Business Activities exceeds AED 1 million within the calendar year (Jan to Dec)
To avoid penalty you need to register through the FTA’s EmaraTax portal. The process involves submitting required information and documents e.g your trade license etc.
- 0% on taxable income up to AED 375,000
- 9% on taxable income above AED 375,000
