UAE Corporate Tax Law is dedicated to the fines and the penalties imposed for non-compliance with the provisions of law as per Chapter 18 of the Corporate Tax, UAE. This section of corporate tax aims to ensure fair taxation practices and discourage any attempts to evade tax liabilities. In this article, we will delve into the process of assessment, fines, and penalties for violations of the UAE Corporate Tax Law, which outlines in the law. As per corporate law, the assessment of corporate tax for taxable persons is carried out in accordance with the tax procedure laws of the UAE and the relevant cabinet decisions issued for the implementation of the law in 2023. This assessment is significant in verifying the accuracy of the information provided in the tax return by ensuring compliance with the tax regulations. Contact Tax Consultant Dubai for more details.
Taxation Based on Net Worth or Profit:
Corporate Tax is not universally applied to all individuals and businesses. Instead, it is imposed on those who surpass a certain threshold of net worth or profit, as determined by the tax authorities as in UAE the corporate tax rate is 0 to 9%.
What Is Tax Evasion:
Tax evasion refers to the illegal use of sources or methods to reduce the amount of tax owed, obtain wrongful tax refunds, or avoid payment altogether. When an individual or business attempts to claim a tax refund to which they are not entitled, using any means available, it constitutes tax evasion. Unfortunately, tax evasion is not uncommon in the world, and tax authorities impose penalties and punishments to deter such fraudulent practices.
Combating Tax Evasion:
Tax authorities worldwide take tax evasion seriously and implement measures to combat this illegal activity. These efforts include thorough investigations, audits, and collaboration with international counterparts to uncover instances of tax evasion. By identifying and penalizing those who engage in tax evasion, authorities aim to ensure fairness in taxation and protect the integrity of the tax system.
Penalties for Tax Evasion:
Tax fraud punishments or tax evasion penalties serve as a strong deterrent against illegal tax practices. The penalties depend on the jurisdiction and the extent of the offenses and can range from financial fines to criminal charges, leading to imprisonment in some cases. Tax authorities have the responsibility to enforce these penalties to maintain the integrity of the tax system and protect the interests of honest taxpayers.
Requesting Corporate Tax Assessment:
Under specific circumstances, a taxable person has the right to request a corporate tax assessment from the Federal Tax Authority. This provision allows taxpayers to proactively seek clarification or validation of their tax obligations, promoting a transparent process for assessment.
Penalties for Violations:
The UAE Corporate Tax Law imposes penalties and fines on taxable persons for non-compliance with its provisions. The penalties serve as deterrents against fraudulent practices and encourage taxpayers to fulfill their tax obligations accurately and on time.
Types of Penalties:
The penalties for violations of the UAE Corporate Tax Law encompass monetary fines, additional tax assessments, and administrative penalties. The severity of the penalties varies depending on the nature of the violation and may range from fixed amounts to a percentage of the unpaid tax liability. These penalties are designed to uphold tax compliance and discourage any attempts to evade tax obligations.
Latest/Revised Administrative Penalties:
The revised resolution has introduced modifications to the administrative penalties specified in the latest cabinet decision. Notable modifications include:
– Failure to file a registration application:
The original AED 20,000 penalties have been reduced to AED 10,000 due to the taxable person’s failure to file a registration application by the Tax Law’s deadline.
– Failure to file a deregistration application:
If the registrant fails to file a deregistration application within the prescribed term, the penalty starts at AED 10,000 and reduces to AED 1,000 per month (up to a maximum of AED 10,000).
– Supply without submitting a tax invoice:
The penalty for making a supply without submitting a tax invoice, tax credit note, or a comparable document has been reduced from AED 5,000 (per tax invoice) to AED 2,500 per incident identified. If the rules and procedures for producing electronic tax invoices and electronic tax credit notes are not followed, the fine for each tax invoice remains AED 5,000 but reduces to AED 2,500.
– Late payment of the tax due:
The percentage-based penalties for late payment of the tax due in the tax return, voluntary disclosure, or tax assessment have been revised. The new late payment fine is calculated as follows:
- 2% of the unpaid tax on the day following the payment due date.
- 4% of the unpaid tax incurs a monthly penalty of 4% starting one month after the payment due date, recurring on the same day each subsequent month. The 300% limit still applies.
Factors Considered for Penalties:
When determining the penalties for violations, authorities take various factors into account, including the severity of the offense, the taxpayer’s intention, the extent of the violation, and the taxpayer’s compliance history. Repeat offenders or those involved in deliberate tax evasion may face more severe penalties than those who make unintentional errors. The consideration of these factors ensures that penalties are proportionate to the violation committed and promotes a fair and just tax system.
Additional Administrative Penalties:
In addition to monetary fines, the UAE Corporate Tax Law empowers tax authorities to impose administrative penalties for non-compliance. These penalties may involve warnings, suspensions, or revocations of certain privileges or licenses. The imposition of administrative penalties reinforces the importance of adhering to tax regulations and encourages taxpayers to fulfill their obligations diligently.
Mitigating Penalties:
In certain cases, the law allows for the mitigation of penalties if the taxpayer voluntarily discloses errors, cooperates with the tax authorities, and takes prompt corrective measures. This provision encourages taxpayers to rectify any unintentional mistakes and cooperate with the authorities in resolving tax-related issues. By incentivizing self-correction and cooperation, the law aims to foster a cooperative environment that promotes tax compliance.
UAE’s Dedication to Compliance & Transparency:
The UAE remains steadfastly committed to tax affairs’ transparency and compliance. It upholds the principles of integrity and fairness by imposing penalties on those who engage in tax evasion. The UAE tax authorities actively monitor and investigate potential instances of tax evasion, ensuring that the tax system operates efficiently and without abuse. By doing so, the UAE protects its economy, promotes investor confidence, and maintains a favorable business environment.
Conclusion:
Chapter 18 of the UAE Corporate Tax Law highlights the assessment of corporate tax and the penalties imposed for violations and non-compliance. Through accurate tax assessments and the enforcement of penalties, the law strives to create a fair and transparent tax environment. It is crucial for taxable persons to be aware of their obligations under the law, seek an assessment when needed, and make every effort to comply with the provisions to avoid penalties. By doing so, taxpayers contribute to the growth and development of the UAE’s economy while ensuring a level playing field for all businesses. Understanding corporate tax law penalties and assessments is essential for maintaining tax compliance and promoting a robust business environment in the UAE. The UAE’s approach to taxation sets it apart from countries that serve as tax havens. With a robust tax system, the UAE ensures that tax obligations are proportionate and based on an individual or business’s financial capacity. By actively combating tax evasion, the UAE upholds its commitment to transparency, compliance, and fair taxation practices.
