UAE Waives Corporate Tax Penalties for First-Timers in Major Compliance Boost

FTA grants administrative penalty exemption for late tax registration and filings—encouraging early compliance and reinforcing the UAE’s transparent, business-friendly tax regime.

Good News for UAE Companies: Corporate Tax Penalties Waived

In a significant development that supports businesses and promotes voluntary compliance, the Federal Tax Authority (FTA) of the United Arab Emirates has announced the waiver of administrative penalties for companies that failed to submit their corporate tax registration applications on time. The decision, issued by the UAE Cabinet and revealed by the FTA on May 7, 2025, is expected to ease the compliance burden on new registrants and reinforce confidence in the nation’s evolving tax system.

What the Exemption Covers

The administrative penalty waiver applies exclusively to the first tax period of any taxable person or exempt entity required to register. Whether the original deadline for submission fell before or after the issuance of the Cabinet Decision, the exemption will still be valid—provided the taxpayer fulfills the revised conditions set by the FTA.

This decision ensures that businesses entering the tax system for the first time are not penalized for delays, recognizing the learning curve that comes with adjusting to new regulatory frameworks.

How to Qualify for the Waiver

To benefit from the exemption, corporate taxpayers must submit their Tax Return or Annual Declaration within seven months from the end of their first Tax Period or first Financial Year. This marks a tightening from the previously permitted nine-month window, underscoring the need for timely submissions.

The FTA clarified the eligibility criteria further:

• If already registered and penalized but payment is pending, the taxpayer must file their return within the seven-month window to have the penalty waived.
• If already registered and the penalty has been paid, a refund will be issued—credited to the taxpayer’s FTA account—upon timely filing.
• If not yet registered, the taxpayer must complete the registration and file the return within the same seven-month deadline to qualify for the exemption.

FTA’s Call for Prompt Action

Khalid Ali Al Bustani, Director-General of the FTA, urged all unregistered corporate taxpayers to act promptly by submitting their registration applications and tax returns through the EmaraTax platform. “Widespread compliance is a key contributor to economic growth,” Al Bustani emphasized, reinforcing the FTA’s commitment to maintaining a flexible, transparent, and evolving tax framework.

Aligned with the Cabinet Decision, the FTA’s broader strategy is to streamline tax procedures and encourage voluntary compliance across all business sectors.

Strong Response from the Business Community

The FTA has reported impressive engagement so far, with over 543,000 corporate tax registrations recorded in the first quarter of 2025 alone. This high turnout reflects a growing understanding of the tax system and the steps businesses are taking to comply.

Al Bustani highlighted the FTA’s efforts in awareness-building and business engagement, stating, “We continue to guide businesses through compliance procedures, gather feedback, and identify solutions to potential challenges.”

Reinforcing Confidence in the UAE’s Tax Environment

This waiver is more than a financial relief—it signals the UAE’s supportive approach to tax reform. By creating room for businesses to comply without the fear of punitive measures for first-time delays, the government is making clear its intent: to foster a business-friendly environment while also enhancing fiscal responsibility.

For UAE companies, especially new entrants navigating corporate taxation for the first time, this is not just good news—it’s a welcome step toward a smarter, more collaborative tax future.