The Federal Tax Authority UAE made a significant public announcement on November 6, 2024. This greatly impacts businesses across the country. According to the decision, the FTA has granted a grace period for updating tax records. The announcement offers much-needed relief to businesses. Those who face challenges with maintaining accurate tax data. The grace period extends from January 1, 2024, to March 31, 2025. Businesses will not be subject to administrative penalties during this duration. The ones failing to update their tax records as required.
The decision welcomes development for taxpayers. They are now free from additional burdens. As previously encountered difficulties with the FTA’s system limitations. A chance for them to avoid technical challenges in amending their records. Note that this grace period does not apply to late corporate income tax (CIT) registrations. It still remains subject to penalties.
The blog explores the:
- Implications of this grace period
- The details surrounding it, and
- The actions businesses should take
These help businesses ensure compliance with UAE tax regulations.
What Does This Grace Period Mean for Businesses?
The grace period UAE, allows businesses to update their tax records with the FTA. This is without facing penalties. Below is a breakdown of what this means:
No Penalties for Failing to Update Tax Records
(1 January 2024 – 31 March 2025)
Businesses will not face penalties if failing to notify the FTA tax record grace period. It could range from AED 1,000 to AED 10,000.
Automatic Cancellation of Penalties:
The penalty will be automatically canceled if it has already been imposed on a business during the grace period. The amounts will be reversed and added back to their tax accounts. In case businesses have already paid these administrative penalties.
Extended Time to Update Tax Records:
The grace period provides businesses with an additional five months to ensure their tax records are updated accurately with the FTA. This will also give the FTA time to enhance its online portal capabilities to better handle tax record changes in the future.
Key Aspects of the Cabinet Decision on Tax Records
The recent Cabinet Decision outlines important regulations for businesses associated with the updating of tax records. They are clarified in the FTA’s public communication (TAXP007). Here’s what you need to know:
Required Changes to Notify the FTA:
According to Article 6(4), businesses must notify the FTA of any record changes. These changes may include:
- Business name
- Registered address
- Contact information (e.g., email)
- Business activities (trade license updates)
- Legal entity type
- Business nature (e.g., changes in the sector or operational focus)
- Address of the business operation
Deadline for Notification:
Businesses must notify the FTA within 20 business days. They are required about any changes that impact the information listed above. Remember, failure to do so results in penalties.
Penalty Range:
The administrative penalties range from AED 1,000 to AED 10,000. A significant burden for businesses. Particularly if multiple changes need to be made.
Penalty Waiver During the Grace Period:
Businesses that do not update their tax records timely will not face penalties. The duration reported is between January 1, 2024, and March 31, 2025. This grace period UAE, allows businesses to get their records in order. Just in time, without facing the financial consequences.
Implications of the Grace Period for Your Business
Grace period announcement is a critical development. Particularly for businesses that experienced difficulties in updating their tax records. For instance, the UAE’s tax system is undergoing rapid improvements. The grace period aims to align businesses with the new requirements.
- Penalty Reversal: Penalties will be reversed by the FTA during the grace period. In case your business has already been penalized for failing to update your tax records. It is required that reversal must reflected in your tax account. If it’s not then contact the FTA to resolve the issue.
- No Immediate Consequences: Businesses will not be penalized for missing the 20-day window. This duration is counted under the grace period for notifying the FTA of record changes. A great relief for many businesses. Especially those who faced delays due to any reason. It can be either due to system glitches or difficulties in updating information.
- Increased FTA System Capabilities: The grace period is also meant to give the FTA time to improve its portal, making it easier for businesses to amend their tax records moving forward. This upgrade will likely streamline the process for businesses in the future.
What Should Businesses Do Now?
Here are the key steps if your business is affected by updating its tax records. Take these steps to ensure compliance:
- Review Your Tax Records:
Take the time to review your business registration details with the FTA. The information must be accurate and up-to-date. These include:
- Company name
- Address
- Business activities, and
- Legal structure.
- Document the Issues:
Document these issues if your business is facing difficulties in updating records. The reason could be anything like due to system limitations. Keep track of any error messages or delays. These challenges you may encounter while attempting to amend your tax records on the FTA portal. - Notify the FTA of Issues:
Email the FTA detailing the challenges. In case you’re unable to update your tax records on the FTA portal. For escalated matters, include any reference numbers provided by the FTA. This documentation can help you later in case the penalties are not automatically reversed. - Monitor Your Tax Account:
Monitor your tax account once the grace period is in effect. It means that any penalties imposed before January 1, 2024, are reversed. Contact FTA to resolve the matter if the penalty is not reversed. - Audit Trail and Evidence:
Keep a record of all communications with the FTA, including emails, reference numbers, and any escalated issues. These documents will form part of your audit trail and can serve as evidence for any waiver of penalties or further requests for adjustments.
When Does This Grace Period End?
The tax record grace period lasts from January 1, 2024, to March 31, 2025. This is a generous timeframe for businesses. They can update their tax records without facing administrative penalties. Remember, the grace period is limited to this window. It is advisable for businesses to take action promptly. This way, they can update their records before the grace period expires.
What’s Not Covered by the Grace Period?
It is important to note that this grace period applies only to the updating of tax records. It does not cover late tax registration for corporate income tax (CIT). Businesses that fail to complete their CIT registrations on time will still face penalties, regardless of the grace period.
Final Recommendations for Businesses
The grace period offers temporary relief from administrative penalties. In the long term, businesses must be compliant with all tax requirements. To minimize future risks:
Stay Proactive:
Review your tax records and ensure they are accurate. Timely updates will help you avoid penalties in the future.
Keep Records Updated:
Update the FTA with any changes to your business details as your business grows or changes,
Seek Professional Assistance:
Consider a tax professional or business consultant if you’re unsure about the process or face technical challenges. Their assistance helps you navigate the requirements and ensure compliance.
Conclusion:
In the UAE, the grace period for updating corporate tax in UAE records provides much-needed relief for businesses. It offers them a great chance to get their records in order. Even without any fines and penalties. But, businesses must act proactively. They must ensure their tax details are updated before the grace period ends.
Failing to update tax records under a grace period? Or face complexities to understand the process, get assistance from MBS Consultancy. We’ll handle it everything for you while you can operate your business stress-free!
