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The UAE has been long recognised as a tax-free country, requiring minimal complexities for businesses to operate in the region. However, with the introduction of corporate tax law, businesses are obligated to update their tax information to avoid administrative penalties and ensure compliance in the UAE in 2023.
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Recently, the Federal Tax Authority has issued a new decision to streamline compliance and support businesses in the UAE. The authority has introduced a grace period for registrants to update their tax records. This FTA tax record update grace period UAE begins on 1 January 2024, until 31 March 2025, allowing registrants to update critical tax registration information related and ensure uninterrupted business operations in the UAE. .
Key Changes Requiring Update
There is no denial of the fact that the UAE has one of the most supportive business policies. At the same time, it impeccably meets all laws and regulations to ensure transparency and ethical business operations. In tandem, FTA has announced that the registrant must notify the authority of any changes to their tax records within 20 business days of the occurrence. To maintain an accurate and up to date tax record, administrative penalties will be imposed on businesses failing to inform the FTA about such changes or complying with these regulations.Â
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The following changes must be reported to the authority:
- Registrant’s Name – Any change made to the registered business, trade or individual registrant’s name;
- Address or Email Address – Any change made to the physical or email address mentioned in FTA records;
- Business Activities License – Any updates or changes made in the business license or its activities.
- Legal Entity Type – Modifications in the registrant’s legal entity type or partnership agreement (for unincorporated partnerships), or changes to the Articles of Association or its equivalent.
- Nature of Business – Any change in the nature of the business carried out by the registrant.
- Business Address – Any updates or changes made to the address of business operations or activities.
Significance of updating tax records
Businesses that are obligated to comply with the UAE corporate tax laws, they need to be swiftly aligned with the FTA. Accurate tax records essentially ensure that all communications between business entities and the FTA are smooth and that tax obligations are met in a timely manner. However, if any discrepancies in the information appear, it may result in missed notifications, delayed filings, or incorrect assessments. Subsequently, this leads to heavy penalties or even legal complications for the business, license activation or its operations.
Penalties During the Grace Period
Reversal of Penalties Imposed Before the Grace Period
Along with the announcement of the grace period, the FTA has also announced that registrants who have already paid penalties for their failure to update tax records on time i.e. between 01 January 2024 and the start of the grace period, their penalties will be refunded. This comes as a big relief to businesses that have already missed deadlines but are now ready to take steps to comply to the law.
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Next Steps for Registrants
Considering it once in a blue moon opportunity, registrars should take advantage of the grace period. They should immediately review the information related to their tax records, including the following:
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- Contact details (name, address, and email)
- Legal entity type and partnership agreements
- The nature of business activities and the location of business operations
Key Takeaways
- The FTA is offering a grace period from 1 January 2024 to 31 March 2025 for registrants to update their tax records without facing administrative penalties.
- All relevant changes, such as name, address, legal entity type, and nature of business, must be communicated to the FTA within 20 business days of the change.
- Penalties incurred between 1 January 2024 and the start of the grace period will be reversed if the required updates are made during the grace period.
Conclusion
The FTA grace period 2025 UAE represents a unique opportunity for businesses to review and update their tax information with the FTA. To capitalize on this opportunity, they should act quickly to ensure that their records are up to date, avoid future penalties, and remain compliant with UAE tax laws.
For more information on how to update your tax records, seek expert assistance. Feel free to contact us at A&A Associate, a leading business advisory and accounting firm in the UAE. Our team of experts ensure a smooth and penalty-free process during this grace period. Speak with us today!
