Good news for UAE companies: Corporate tax penalties waived

The Federal Tax Authority (FTA) of the UAE announced on May 7 that it has begun exempting certain corporate taxpayers from administrative penalties incurred due to the late submission of registration applications.

This exemption follows a decision issued by the UAE Cabinet.

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How to qualify for the waiver

To be eligible for the penalty waiver, the taxable person (or exempted category) must submit their Tax Return (or Annual Declaration) within seven (7) months from the end of their first Tax Period (or first Financial Year)—a reduction from the previously allowed nine months, a WAM report said.

Clarification from the FTA

The FTA clarified that this exemption applies only to the first tax period of the taxable person (or exempt person required to register), regardless of whether the original due date falls before or after the Cabinet Decision’s implementation.

Additionally, if a taxable person has already paid a penalty for late registration and meets the exemption criteria, the penalty amount will be refunded and credited to the taxpayer’s account with the Authority.

Similarly, registered taxpayers who filed returns before the exemption decision but were penalized for late submission will also receive a refund of the paid penalties.

FTA’s appeal to taxpayers

Khalid Ali Al Bustani, Director-General of the FTA, urged all unregistered corporate taxpayers to promptly submit their corporate tax registration applications and tax returns through the EmaraTax platform. He emphasized the importance of meeting the deadlines specified in the Cabinet Decision to benefit from the exemption.

Aligned with the Cabinet’s decision, the FTA’s strategy focuses on expediting tax procedures and encouraging voluntary compliance across all business sectors.

“Widespread compliance is a key contributor to economic growth, and the FTA remains committed to full transparency and maintaining a flexible, evolving tax framework,” said Al Bustani.

High registration turnout

Praising the strong registration response in Q1 2025, Al Bustani revealed that over 543,000 corporate tax registrations had been recorded—indicating growing awareness and compliance among businesses.

“The FTA continues to engage with businesses through various awareness channels to guide them through compliance procedures, gather feedback, and identify solutions to potential challenges,” he added.

Eligibility and conditions for exemption

The FTA explained that the exemption applies to all persons subject to corporate tax registration, whether or not they have applied for registration or were penalized for delays.

Conditions for exemption:

1. If registered and a penalty was imposed but not paid, the return (or annual declaration) must be submitted within seven (7) months of the end of the first Tax Period (or Financial Year) to qualify for the exemption.
2. If registered and the penalty was already paid, the return must also be submitted within seven (7) months of the end of the first Tax Period to receive a refund of the penalty.
3. If not yet registered, the taxpayer (or exempt person) must submit the registration application and then file the return within seven (7) months of the end of the first Tax Period to benefit from the exemption.