The UAE Federal Tax Authority (FTA) has announced that businesses failing to pay due corporate taxes will incur a monthly penalty calculated at an annual rate of 14%. This penalty applies to the unpaid tax amount and accrues from the day following the payment deadline, compounding on the same date each subsequent month.
According to Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, the payment deadline is no later than nine months after the end of the relevant tax period. For instance, if a company’s fiscal year concludes on December 31, the corporate tax payment is due by September 30 of the following year.
The corporate tax law, effective for financial years starting on or after June 1, 2023, imposes a standard tax rate of 9% on taxable income exceeding Dh375,000, with certain exemptions for free zone entities.
In addition to the 14% annual penalty on unpaid taxes, businesses should be aware of other administrative penalties for non-compliance. For example, late registration for corporate tax can result in a fixed penalty of Dh10,000. Furthermore, failure to submit tax returns on time may lead to escalating fines, starting from Dh500 per month.
Businesses are advised to maintain accurate financial records, submit timely tax returns, and promptly pay any taxes due.
This development aligns with the UAE’s broader strategy to enhance fiscal transparency and diversify government revenue sources beyond the oil sector. The introduction of corporate tax marks a significant shift in the UAE’s tax policy, aiming to align with international standards and support the country’s economic development goals.
