UAE tax penalties reduced and discounted

On April 28th, 2021, the UAE Cabinet issued Resolution No 49 of 2021 amending tax penalties and provides reduction, alternative calculations, and discount on unpaid penalties.

The resolution will be effective on 28 June 2021.

Key changes on amounts, dates, and calculations

  • Late registration penalty reduced from AED 20,000 to 10,000
  • Late deregistration reduced from AED 10,000 upfront to AED 1,000 per month of a delay (max 10,000)
  • Not displaying prices inclusive of tax reduced from AED 15,000 to 5,000
  • Incorrect tax invoice reduced from AED 5,000 to 2,500 for instance
  • Late payment penalty (after 30 days) reduced from 1% daily to 4% monthly
  • Incorrect tax return can be revised before the due date without any penalty
  • Late payment penalties on correction of previous tax returns will be calculated 20 days from the date of filing the voluntary disclosure, and not from the original tax return as it has been before.

Discounts of penalties imposed before the effective date

By virtue of this Resolution, the Federal Tax Authority of the UAE (FTA) will have the right to reduce unpaid penalties imposed prior to the effective date to 30% of the total unpaid penalties, subject to the following conditions:

  • The penalties were imposed prior to the effective date and have not been fully paid
  • The registrant has paid all the taxes due by 31 December 2021.
  • The registrant has paid 30% of the tax penalty by 31 December 2021.

What you should do if you have unpaid penalties

  1. Correctly set your “Payment adjustment type” on your FTA account to “Tax liability cleared first” (mostly it will be a default setting)
  2. Identify the exact amounts of due penalties and taxes separately.
  3. Pay all due taxes by 31/12/2021.
  4. Pay 30% of the outstanding penalties by 31/12/2021.

The FTA shall further determine the exact procedures for implementing the discount.

Let’s chat

For further discussion on compliance, tax, and accounting, please contact us:

[email protected]

04 483 55 66

056 464 1551

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This information summary is provided for general awareness purposes only and is not intended to replace an accounting, tax, or professional advice. Please seek professional advice before making any decision. We assume no liability or responsibility for any errors, omissions, or inaccuracy in this content.