The UAE Ministry of Finance (MoF) has announced a significant step towards the implementation of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law). The Ministry issued Cabinet Decision No. (75) of 2023, which outlines administrative penalties for violations related to the Corporate Tax Law. Effective from 1st August 2023, the decision specifies the penalties that will be imposed by the Federal Tax Authority for non-compliance with the new regulations.
The Corporate Tax Law Penalties have been meticulously designed and benchmarked to ensure a successful implementation while not overburdening UAE businesses that diligently adhere to the new tax regulations. Younis Haji Al Khoori, the Under-Secretary of the Ministry of Finance, emphasized that Corporate Tax compliance is a collective responsibility of all taxable persons to support the UAE’s commitment to the highest global standards and foster sustainable economic growth by providing a conducive legislative environment that promotes tax compliance.
Under Cabinet Decision No. (75) of 2023, penalties will apply to Taxable Persons, whether individuals or legal entities, who fail to fulfill their obligations under the Corporate Tax Law. These penalties encompass cases of failure to file and pay Corporate Tax on time, as well as the failure to notify the Federal Tax Authority of any required amendment to tax records. The decision also introduces a new structure for voluntary disclosure penalties.
Further, penalties will be imposed for inadequately maintaining records or submitting required records and information specified in the Tax Law. The Ministry of Finance also announced Cabinet Decision No. (81) of 2023, which outlines additional conditions for Qualifying Investment Funds under the Federal Decree-Law No. (47) of 2022. This decision sets forth additional requirements that investment funds must meet to be treated as a Qualifying Investment Fund and be exempt from Corporate Tax, ensuring the integrity of the Corporate Tax system while enhancing the UAE’s competitiveness as an investment hub.
The Cabinet Decision includes conditions such as being primarily engaged in investment business activities, having controlled share ownership by investors, and being overseen by an investment manager employing a minimum of three investment professionals. For Real Estate Investment Trusts (REITs), exemption conditions include the necessity for real estate assets, excluding land held by the REIT, to exceed Dhs100 million in value.
Moreover, the UAE Ministry of Finance has issued Cabinet Decision No. (74) of 2023 on the Executive Regulation of Federal Decree-Law No. (28) of 2022 on Tax Procedures (New Tax Procedures Law). This decision replaces the existing Executive Regulation on Tax Procedures, aligning definitions, procedures, and processes with the New Tax Procedures Law that took effect on 1st March 2023.
With the introduction of Corporate Tax in the UAE and the Corporate Tax Law becoming effective for tax periods starting on or after 1st June 2023, ensuring continuous updates to relevant legislation and providing essential guidance to Taxable Persons is essential to maintain compliance and uphold the country’s thriving economic landscape.