UAE Launches One-Time Waiver for Corporate Tax Penalties to Support Businesses
April 2025 – UAE Business Desk
As part of the UAE’s ongoing corporate tax implementation that took effect on June 1, 2023, the Ministry of Finance and the Federal Tax Authority (FTA) have formalized a framework of administrative penalties to ensure compliance across all business sectors. However, in a move designed to ease the transition for businesses, the government has also announced a one-time penalty waiver initiative for eligible companies.
Corporate Tax Penalties Now in Force
Under the newly implemented tax regime, businesses that fail to meet registration and filing obligations may face the following administrative penalties:
- Failure to Register on Time: AED 10,000
- Late Filing of Tax Returns: AED 500 per month for the first 12 months, then AED 1,000 per month
- Late Payment of Taxes: 14% annual interest on outstanding tax, calculated monthly
- Failure to Maintain Proper Records: AED 10,000 (first offense), AED 20,000 (repeat within 24 months)
- Delayed Record Updates: Variable penalties depending on the delay and infraction
These measures aim to enforce accountability while aligning the UAE with global tax practices under OECD guidelines.
One-Time Penalty Waiver Initiative
In recognition of the challenges faced by businesses adapting to the new regulations, the FTA has rolled out a temporary penalty waiver for companies that missed initial registration deadlines.
Who Qualifies?
To benefit from the waiver, businesses must:
- Register promptly upon discovering non-compliance
- File their first corporate tax return within seven months of their financial year-end
- Maintain proper financial and accounting records
- Comply with all other tax obligations during the transition period
Entities that qualify may also be eligible to claim refunds for penalties already paid.
This initiative reinforces the UAE’s reputation for fostering a business-friendly environment, even amid sweeping regulatory changes.
What Businesses Should Do Now
With deadlines looming, companies are urged to:
- Review registration status and ensure compliance
- File returns on time to avoid penalties and maintain waiver eligibility
- Seek professional advice from experts such as Eagle Eye International to navigate complex requirements such as transfer pricing and qualifying income for free zone entities
For businesses seeking to align with UAE tax law or assess their eligibility for the waiver, consultation with licensed tax agents or the FTA is strongly recommended.
