The UAE’s corporate tax regime requires every business to file an annual return and pay tax by strict deadlines. Missing these obligations exposes companies to FTA penalties for late corporate tax filing and late payment fines. These penalties grow quickly, can damage a company’s reputation, and may trigger deeper scrutiny from the Federal Tax Authority (FTA).
This guide explains all corporate tax fines under the UAE Corporate Tax Law, Cabinet Decision No. 75 of 2023, and Cabinet Decision No. 10 of 2024, including filing and payment penalties, voluntary disclosure rules, and other administrative fines. We also highlight the FTA’s temporary penalty waiver program and provide practical steps to avoid penalties.
Late Filing Penalties
If a corporate tax return is not filed by the deadline, the FTA imposes monthly penalties:
| Late Filing Period | Penalty |
|---|---|
| First 12 months late | AED 500 per month (or part thereof) |
| From 13th month onward | AED 1,000 per month (or part thereof) |
Even a one-day delay counts as a full month. Filing a return 13 months late would result in AED 11,000 in accumulated fines.
Filing deadlines depend on your financial year. See our guide: Corporate Tax Filing Deadlines in the UAE: Key Dates for 2025.
Late Payment Penalties
If tax is not paid by the due date, the FTA charges 14% annual interest on the outstanding amount (≈ 1.17% per month). This accrues from the day after the deadline until the tax is paid in full.
Example: A company owing AED 100,000 that pays one year late will face roughly AED 14,000 in late payment interest, in addition to filing fines.
There is no cap. Interest keeps building until full payment is made.
Filing vs Payment Penalties
- Filing penalties are fixed fines (AED 500/1,000) for missing the return submission deadline. They apply even if no tax is due.
- Payment penalties are proportional (14% interest) and apply only if tax is unpaid.
- A company can incur both filing penalties and late payment penalties if it files and pays late.
Voluntary Disclosure and Error Penalties
A voluntary disclosure is when a business realises it has made a mistake in its filed corporate tax return and proactively corrects it through the FTA’s EmaraTax portal. This could involve underreported income, overclaimed deductions, or other errors. Making the correction early shows good faith and reduces the risk of larger fines.
| Type of Error | Penalty |
|---|---|
| Incorrect return submitted | AED 500 fixed penalty (unless corrected before deadline) |
| Voluntary disclosure after deadline | 1% per month of underpaid tax, until corrected |
| Error found during FTA audit | 15% of underpaid tax + 1% per month from original due date |
Example:
A company underreports AED 50,000 in taxable profits.
If the company files a voluntary disclosure 3 months late, it pays 3% of AED 50,000 = AED 1,500 in penalties.
If the FTA instead discovers the error during an audit, the penalty rises to 15% of AED 50,000 = AED 7,500, plus 1% per month interest starting from the original due date.
Early voluntary disclosure drastically reduces costs compared to waiting for an FTA audit.
The sooner a business discloses errors, the lower the penalty. Waiting until an FTA audit significantly increases costs, as both a fixed percentage and monthly interest apply.
Other Administrative Penalties (Cabinet Decision No. 75 of 2023)
In addition to filing and payment fines, the FTA enforces other compliance rules:
| Violation | Penalty |
|---|---|
| Failure to maintain records | AED 10,000 (AED 20,000 if repeated) |
| Failure to provide info in Arabic | AED 5,000 |
| Failure to notify changes in business details | AED 1,000 (AED 5,000 if repeated) |
| Late deregistration | AED 1,000 per month, capped at AED 10,000 |
| Failure to deregister tax agent or legal representative | AED 1,000 |
| Legal representative fails to file on behalf of taxpayer | AED 500 per month (AED 1,000 after 12 months) |
| Tax agent fails to notify appointment | AED 10,000 |
| Tax agent fails to file on behalf of taxpayer | AED 1,000 (AED 2,000 if repeated within 2 years) |
| Failure to submit required declaration | AED 500 per month (AED 1,000 after 12 months) |
| Failure to cooperate with FTA audit | AED 20,000 |
These penalties emphasize that compliance is broader than just filing a return. Businesses must also maintain proper records, provide information in Arabic if requested, keep FTA details up to date, and ensure legal representatives and tax agents fulfil their duties.
Temporary Waiver Scheme for Late Registration
The FTA introduced a one-time waiver for the AED 10,000 late registration penalty under Cabinet Decision No. 10 of 2024. Businesses can avoid or recover this fine if they meet the waiver condition: filing their first corporate tax return (or annual declaration for exempt entities) within seven months of the end of their first tax period.
This waiver applies to all taxable persons, including mainland companies, free zone entities, and exempt entities. It covers only the first tax period and does not extend to later years.
Important details about the waiver:
- Refund mechanics: If you already paid the AED 10,000 fine, the amount is credited to your EmaraTax account as a balance. This can be used against future liabilities or, upon request, withdrawn. It is not automatically refunded to your bank account.
- Reconsideration requests: If you submitted a reconsideration request for the penalty and it was still pending, the request is automatically voided under this waiver. If your reconsideration was already approved, you cannot claim the waiver again.
- Exempt entities: Entities that qualify for exemption but had already been penalized can also benefit, provided they file their first annual declaration within seven months of their first year-end.
- 7 months vs 9 months: The waiver condition is stricter than the normal filing rule. Businesses generally have nine months to file, but only seven months if they want the AED 10,000 penalty waived or refunded.
This relief was created to ease the transition into the UAE’s corporate tax regime. Going forward, only the standard nine-month filing deadline applies, and penalties will be enforced for late filings or payments.
Still need to register? See our service page: Corporate Tax Registration in the UAE.
Compliance Tips to Avoid FTA Penalties
- Mark your filing and payment deadline (nine months after year-end) and set reminders.
- File and pay early to avoid last-day portal issues.
- Budget for tax payments during the year.
- Double-check return accuracy before submission.
- Maintain records for seven years.
- File voluntary disclosures quickly to minimize penalties.
- Stay alert to FTA announcements and rule updates.
File On Time with TaxReady.ae
FTA penalties for late corporate tax filing and payment can grow rapidly. Monthly fines, interest charges, and audit penalties make non-compliance extremely expensive. But they are avoidable; with early preparation, accurate records, and professional guidance, businesses can stay fully compliant.
TaxReady.ae provides expert services for corporate tax registration and corporate tax filing. Our FTA-certified advisors help UAE companies file correctly and on time, ensuring peace of mind.
Contact us today for a free consultation.
Frequently Asked Questions
What is the penalty for late submission of required declarations?
The penalty is AED 500 per month for the first 12 months late, and AED 1,000 per month from the 13th month onward. This applies to mandatory declarations separate from the annual tax return.
Do dormant or inactive companies face penalties?
Yes. Holding a valid trade license requires registration and filing, even if there is no activity. Failure to comply can still trigger late filing penalties.
What penalties apply to tax agents?
Tax agents face fines distinct from legal representatives. Failure to notify the FTA of an appointment results in a AED 10,000 penalty. Failure to file a return on behalf of a taxpayer results in AED 1,000, rising to AED 2,000 if repeated within two years.
Do I need to provide documents in Arabic if requested by the FTA?
Yes. The FTA may request tax records in Arabic. Failure to provide them can lead to a AED 5,000 penalty.
How long must I keep tax records?
The FTA requires businesses to maintain records for at least seven years after the end of the relevant tax period.
Can corporate tax penalties in the UAE be appealed?
Yes. Businesses can submit a reconsideration request to the FTA within 20 business days of receiving a penalty notice. The FTA will review and decide on the request, but late filing and payment penalties are rarely waived unless covered by an official waiver scheme.
Are penalties different for small businesses under the Small Business Relief?
Small Business Relief reduces the tax due but does not remove filing obligations. Missing deadlines can still lead to late filing fines or administrative penalties.
What happens if I cannot pay penalties immediately?
Unpaid penalties continue to accrue interest and may block license renewals or other government approvals until settled. It is always best to pay promptly or arrange settlement through the FTA portal.
What happens if I ignore repeated FTA notices?
Beyond accruing fines, persistent non-compliance may escalate to tax evasion investigations, which carry severe financial and legal consequences, including possible license suspension or prosecution.
