The Federal Tax Authority (FTA) recently introduced a grace period from January 1, 2024, to March 31, 2025, allowing businesses registered for VAT, Corporate Tax, or Excise Tax to update their tax records without incurring penalties.
These updates mark a shift in the regulatory landscape, limiting the applicability of ESR to financial years ending on or before 31 December 2022, effectively cancelling ESR obligations from 2023 onward.
Below is a comprehensive guide on what this grace period entails, who it applies to, and how businesses can take full advantage of this opportunity.
Who Should Take Advantage of the Grace Period?
The grace period applies to any taxpayer registered for VAT, Corporate Tax, or Excise Tax in the UAE who needs to update their information, especially in the following areas:
- Changes in Legal Structure or Ownership: Businesses that have recently restructured, merged, or undergone ownership changes should ensure these updates are reflected in their FTA records.
- Address or Contact Information Updates: Updating a business’s office address or primary contact information with the FTA will ensure ongoing compliance and proper communication.
- Changes in Business Activities: Businesses that have expanded or modified their activities may need to update the FTA to ensure correct classification in line with tax obligations.
- License Renewals or Amendments: If a trade license has been renewed, updated, or amended (e.g., a change in legal name or business scope), this information should be shared with the FTA.
Key Benefits of Updating Tax Records During the Grace Period
- Avoidance of Penalties: Registrants can make updates without incurring the usual administrative penalties.
- Reversal of Past Penalties: Any penalties for previously unreported updates may be reversed if corrections are made within the grace period.
- Enhanced Compliance: Ensures that all business records are current and aligned with FTA regulations.
Frequently Asked Questions (FAQs)
- What happens if I do not update my information during the grace period?
Failure to update records within the grace period will result in administrative penalties once the period ends on March 31, 2025. - Are all types of changes in tax records covered by the grace period?
Yes, the grace period covers various updates, including changes in business structure, address, contact information, and business activity, as well as license renewals and amendments. - Will the FTA automatically reverse penalties applied before the grace period?
Penalties previously incurred for failing to update information may be reversed if the necessary updates are completed within the grace period. Businesses may need to follow up with the FTA to confirm the reversal of specific penalties.
How We Can Help
At XB4, we understand that navigating tax compliance requirements can be complex. Our team of tax professionals is available to assist you with updating your FTA records efficiently. We can help ensure your business remains compliant, avoiding any potential penalties associated with outdated information.
If you have questions about the grace period or need support with the update process, please contact us to schedule a consultation. Our expertise in UAE tax compliance can help you make the most of this opportunity to align your records with FTA requirements.
