Legal Penalties for Not Filing Corporate Tax Returns
Do you know that filing Corporate Taxes is essential to running a business in the UAE? However, several people in the UAE still think they can run their businesses without filing tax returns. If you also think the same thing, you are committing a big mistake for your company’s success. You might be shocked to know that there are several penalties and punishments if your Business Doesn't File Taxes. Today, we will highlight the consequences and penalties you might face when you don’t file the Corporate Tax in the UAE.
Corporate Tax Return - Overview
We have decided to clear your basics before diving into the consequences and Penalties for not filing Corporate Taxes.
The Corporate Tax return is a document that corporations like yours and other legal entities must file with the relevant tax authority to report your financial and tax-related information. This return is filled out yearly and serves as a method for the UAE government to assess your Corporate Tax liability on your income, credits, deductions, expenses, and other related financial data. In short, you must provide your company information like expense, revenue, profit, assets, tax losses, liabilities, and other similar information in the Corporate Tax return.
The consequences of failing to submit the corporate tax in the UAE
As we discussed above, there are several consequences you must meet if you fail to file a Corporate Tax return in the UAE. The following is the list of consequences for not filing your Corporate Tax in UAE:
1. Audits
Non-compliance can lead your organization to several consequences. Audits are one of those consequences that your business might face if you don’t file your Corporate Tax in the UAE. Suppose the Federal Tax Authority (FTA) suspects your company has either failed to file the Corporate Tax or reported its income wrong. In that case, it will use its authority to conduct an audit of your organization.
The audit process is arduous and demanding as it necessitates detailed financial records and documents by your business. You might feel tensed after knowing that these audits can give rise to penalties, fines, and potential legal action if the FTA identifies that your organization owes additional taxes.
2. Penalties and interests
Penalties and interests are other consequences you must face when you fail to file and pay Corporate Tax in the UAE. indeed, you have read it right! When your business neglects to file taxes under the stipulated timeframe, you must face a failure-to-file penalty of unpaid taxes per month.
As a business owner, you must understand that the longer you delay tax payments, the more you will accumulate in terms of interest and penalties. If you want to learn more about the Corporate Tax evasion penalties in the UAE, you should keep reading as we will disclose the penalties for not filing the corporate tax later in this article. However, you can avoid these adverse consequences and maintain compliance with regulatory requirements by timely filing your Corporate Tax.
3. Legal action
The Federal Tax Authority (FTA) may also initiate legal proceedings against your business if you become non-compliant with tax filing and payment obligations. Are you wondering what kind of legal action the FTA take against your company? In that case, you might be shocked after reading that it involves filing a lawsuit to recover unpaid taxes from you or asking the court to seize your business asset. You might also be tensed to know that this legal action can be a burdensome and costly process that potentially causes significant financial damage and harms your business’s reputation. Therefore, you should file and pay the Corporate Tax in the UAE before the deadline specified in the Corporate Tax law.
4. Lean and levies
The Federal Tax Authority (FTA) may also impose lean on your business asset if your Business Doesn't File Taxes. Indeed, you have read it right! When your business neglects your tax obligations, the FTA may place a lean on your business asset to create a legal claim against your company’s property and assets. You might be shocked after knowing that the lean will hinder your business’s ability to acquire its credit or sell its assets.
This is not the end as the FTA can also take further action by starting levies that legally seize your business assets, including your bank accounts, real estate, and other owned assets to satisfy its debt. Therefore, you should prefer timely corporate tax filing and payment to avoid the imposition of lean and levies that could obstruct your financial stability and operation.
Penalties for not filing corporate taxes
As mentioned above, you may pay the Penalties for not filing Corporate Taxes in the UAE. According to Corporate Tax law (Decision No. 75 of 2023), if you fail to submit the corporate tax return within the given timeframe allowed by the legal authority, you will be charged AED 500 monthly for one year. However, if you submit the tax return in the tax period, you will be exempted from penalties and fines. But if you fail to submit the tax for one year, the penalty will increase to AED 1000 monthly thereafter.
Do you know when these penalties will be implemented? In that case, you should remember these penalties apply from the next day when the legal timeframe ends for your Corporate Tax return submission. In addition, you might be tense to know these penalties will continue on the same date for all subsequent months until you file the tax. Therefore, you should try to file your Corporate Tax within the legal timeframe to avoid these penalties in the UAE.
How can Flyingcolour Tax Consultants help you?
From hefty audits to lean and levies, there are countless consequences you must face when your Business Doesn't File Taxes. It highlights the importance of filing your business’s tax in the UAE. However, you must prepare an accurate Corporate Tax return to avoid these situations. Flyingcolour Tax Consultants can help you prepare your tax return and file it appropriately. Our experts can solve any of your confusion about Corporate Tax.
To learn more about What Happens if a Business Doesn’t File Corporate Tax Return?, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.