The Federal Tax Authority (FTA) has unveiled a new initiative aimed at easing compliance for businesses in the UAE. From January 1, 2024, to March 31, 2025, tax registrants will have the chance to update their records without facing administrative penalties. This proactive move underscores the FTA’s commitment to supporting businesses in meeting their obligations efficiently while fostering a more business-friendly regulatory environment.

This grace period for tax records updates provides an invaluable opportunity for businesses that may have fallen behind on updating their tax records. Companies can now correct errors or omissions and align their tax documentation with regulatory requirements—penalty-free. This includes addressing instances where businesses failed to inform the FTA of required modifications in their tax records.

What Changes Should Be Reported to the FTA?

As a business, you must notify the FTA of any changes to the following key information:

• Business name, address, and email.
• Trade activity license.
• Legal entity type, including changes to partnership agreements or articles of association.
• Nature of business operations.
• Business address, including the opening of new branches.

For instance, if you’ve opened a new branch or moved your business to a different location, these changes must be updated in your tax records. If you’ve failed to do so within the 20-business-day deadline, the grace period for tax records updates offers a chance to correct those records without penalties.

Why is this Grace Period for Tax Records Updates Important?

By utilizing the grace period, businesses can ensure their tax records are accurate and up to date. This is essential for remaining compliant with the UAE’s tax regulations, which is crucial when registering for VAT, Excise Tax, or Corporate Tax. Updating your records now helps streamline your tax processes and avoids complications in the future.

What Happens if You Don’t Update Your Records?

Currently, failure to update the records within the required timeline is subject to the following penalties:

1)     Value Added Tax records (as per Cabinet Decision No. 49 of 2021):
·       AED 5,000 for the first time; or
·       AED 10,000 in case of repetition
2)     Corporate Income Tax Records (as per Cabinet Decision No. 75 of 2024):
·       AED 1,000 for each violation;
·       AED 5,000 in each case of repeated violation within 24 months from the date of the last violation.

However, the good news is that any penalties imposed between 1 January 2024 and the start of the grace period will be automatically reversed. If your business has already paid penalties for failing to update its records, the amount will be refunded and credited back to your tax account without requiring any action on your part.

In cases where taxpayers have already paid such penalties, they can still obtain a reversal of the penalty amount on their tax account through automatic reversal from the FTA. Hence, businesses are not required to contact the FTA to obtain a reversal of the administrative penalty, as this will be done automatically.

What are the instances of violations covered under the grace period for tax records updates?

• Failing to inform the FTA within prescribed timelines that a new branch was opened and to upload the new trade license for that branch.
• Failing to inform the FTA within prescribed timelines that the business moved to another address;
• Failure of VAT/Excise Tax registered person to update records within prescribed timelines before attempting to register for UAE CIT; and,
• Registering for UAE CIT with incorrect details and failing to correct information within the prescribed timelines.

How Does This Affect Your Business?

This grace period for tax records updates provides a valuable opportunity to rectify any mistakes in your tax records without facing financial penalties. It’s important for businesses to take advantage of this period to avoid the stress of penalties and ensure they remain compliant with UAE tax laws. Whether you’re making minor updates or correcting significant errors, this is the time to do so and ensure your business is fully aligned with FTA requirements.

MS to Leverage the UAE’s Grace Period for Tax Records Updates

At MS, we specialize in helping businesses take full advantage of the UAE’s grace period for tax records updates. Our services include reviewing and updating tax records, ensuring accurate reporting to the FTA, and aligning your records with VAT, Excise Tax, and Corporate Tax requirements. If your business has already paid penalties, we assist in monitoring the automatic reversal process to ensure refunds are credited correctly. With our expertise in UAE tax laws and tailored support, we make compliance effortless, saving you time and ensuring your business remains penalty-free and fully aligned with FTA regulations.