Effective August 1, 2023, the UAE became subject to new tax regulations established by Cabinet Decision No. 74 of 2023 "On the Executive Regulations of Federal Decree-Law No. 28 of 2022 on Tax Procedures" ("Decision No. 74") and Cabinet Decision No. 75 of 2023 "On the Administrative Penalties for Violations Related to the Application of Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses" ("Decision No. 75").
Decision No. 74 applies to corporate tax, excise taxes and VAT. It replaced the existing Tax Procedures Regulation and aligns tax definitions, procedures and processes with the new Tax Procedures Law, effective March 1, 2023. In particular, the rules relating to record keeping, UAE licensing authorities, notification methods, tax audits, etc. have been changed. A detailed discussion of the changes can be found in the UAE Tax Authority's clarifications TAXP006.
Decision No. 75 sets out a list of fines to be levied by the UAE Federal Tax Administration for violations related to non-compliance with the corporate tax laws. However, Cabinet Decision No. 40 of 2017 on Administrative Fines for Violations of Tax Laws in the UAE, as amended by Cabinet Decision No. 49 of 2021, will continue to apply to violations related to excise taxes and VAT.
Importantly, penalties for violations related to the payment of corporate tax are lower than penalties for non-payment of other taxes. For example, in case of failure to fulfill the obligation to voluntarily disclose information on excise and VAT payments, a taxpayer will be fined 50% of the tax difference and 4% monthly of the unpaid tax, while a corporate taxpayer who does not voluntarily disclose information will be fined 15% of the tax difference and 1% monthly of the unpaid tax.
The UAE Ministry of Finance continues to work on improving the regulation of the tax system, with a focus on corporate tax rules and penalty policy. In this regard, anyone wishing to do business in the UAE should strictly comply with all provisions of the country's tax laws: competently maintain and submit tax records, correctly calculate taxes payable, submit all necessary information to the Federal Tax Authority in a timely manner, etc.
See sources:
Cabinet Decision No. 74 of 2023 "On the Executive Regulations of Federal Decree-Law No. 28 of 2022 on Tax Procedures"
Cabinet Decision No. 75 of 2023 "On the Administrative Penalties for Violations Related to the Application of Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses"
Public Explanations on Tax Procedures from UAE Tax Authority TAXP006
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