Corporate Tax Penalty Waiver

Corporate Tax Penalty Waiver (Public Clarification CTP006)

One of the most critical developments in 2025 for UAE businesses is the launch of the Corporate Tax Penalty Waiver initiative. Recognizing the challenges faced by organizations during the first phase of implementation, the Federal Tax Authority has introduced a mechanism to waive or refund the AED 10,000 late registration penalty under Public Clarification CTP006.

Understanding the Late Registration Penalty

When the UAE Corporate Tax regime was introduced, all taxable persons were required to register within a specified timeframe based on their license issuance date. Failure to register on time resulted in an automatic administrative penalty of AED 10,000.

Many businesses, especially SMEs, missed this deadline due to lack of awareness or confusion about the requirements. The FTA recognized this challenge and introduced CTP006 to provide relief to affected businesses.

The 7-Month Grace Period Rule

The primary condition for qualifying for a waiver of the late registration penalty is centered on the filing of the first tax return. Under Public Clarification CTP006:

This represents a two-month reduction from the standard nine-month filing deadline, serving as an incentive for early compliance. For businesses that file within the standard nine-month window but after seven months, the penalty waiver does not apply.

Key Deadlines for Penalty Waiver

Refund Scenarios for Paid Penalties

For businesses that have already settled their AED 10,000 late registration fine, the initiative offers a path to recovery. If the first tax return is filed within the seven-month window:

• Automatic Credit: The FTA will automatically credit the paid penalty amount back to the taxpayer's EmaraTax account.
• Offset Future Liabilities: The credit can be utilized to offset future tax liabilities.
• Cash Refund: The credit can be requested as a cash refund through the EmaraTax portal.

Who Qualifies for the Penalty Waiver?

The penalty waiver under CTP006 applies to the following categories of taxpayers who received a late registration penalty:

• Unregistered Persons: Taxable persons who should have registered but did not, and subsequently registered late.
• Registered but Late: Persons who registered after their deadline but before the issuance of a penalty notice.
• Penalty Paid: Persons who paid the AED 10,000 penalty in full.
• Penalty Unpaid: Persons who received a penalty notice but have not yet paid.

The Waiver Process

One of the most significant advantages of the CTP006 waiver is that it is largely automatic:

1. File Your Return: Submit your first Corporate Tax return within seven months of year-end.
2. Automatic Waiver: The FTA system automatically waives the penalty if you qualify.
3. Credit Issued: For paid penalties, a credit is automatically issued to your EmaraTax account.
4. Refund Request: If you want cash instead of credit, submit a refund request through EmaraTax.

Waiver FAQ: Strategic Remediation

Important Limitations

While the CTP006 waiver provides significant relief, it's important to understand its limitations:

• Registration Penalty Only: Only applies to the AED 10,000 late registration penalty, not other penalties.
• First Tax Period: Applies only to the first tax period for which a return is required.
• Seven-Month Window: Strict deadline of seven months from year-end, not extendable.
• No Separate Application: Waiver is automatic upon qualifying filing, no separate waiver application needed.

How Apex FinConsultants Can Help

Our team can assist you with all aspects of the penalty waiver process:

• Eligibility Assessment: Determine if you qualify for the penalty waiver under CTP006.
• Deadline Calculation: Identify your exact seven-month deadline based on your financial year.
• Return Preparation: Ensure your first return is filed accurately and within the waiver window.
• Credit Recovery: Assist with refund requests if your penalty was already paid.
• Penalty Planning: Help minimize additional penalties if you're outside the waiver window.