diff --git a/azure/scope/machine.go b/azure/scope/machine.go
index 285b186e585..565811328eb 100644
--- a/azure/scope/machine.go
+++ b/azure/scope/machine.go
@@ -22,6 +22,7 @@ import (
 	"encoding/json"
 	"strings"
 
+	"github.com/Azure/azure-sdk-for-go/sdk/resourcemanager/authorization/armauthorization/v2"
 	"github.com/Azure/azure-sdk-for-go/sdk/resourcemanager/compute/armcompute/v5"
 	"github.com/pkg/errors"
 	corev1 "k8s.io/api/core/v1"
@@ -352,6 +353,7 @@ func (m *MachineScope) RoleAssignmentSpecs(principalID *string) []azure.Resource
 			Scope:            m.SystemAssignedIdentityScope(),
 			RoleDefinitionID: m.SystemAssignedIdentityDefinitionID(),
 			PrincipalID:      principalID,
+			PrincipalType:    armauthorization.PrincipalTypeServicePrincipal,
 		}
 		return roles
 	}
diff --git a/azure/scope/machine_test.go b/azure/scope/machine_test.go
index 487d94499ae..2b99937f08a 100644
--- a/azure/scope/machine_test.go
+++ b/azure/scope/machine_test.go
@@ -22,6 +22,7 @@ import (
 	"testing"
 
 	"github.com/Azure/azure-sdk-for-go/sdk/azidentity"
+	"github.com/Azure/azure-sdk-for-go/sdk/resourcemanager/authorization/armauthorization/v2"
 	azureautorest "github.com/Azure/go-autorest/autorest/azure"
 	"github.com/Azure/go-autorest/autorest/azure/auth"
 	"github.com/google/go-cmp/cmp"
@@ -478,6 +479,7 @@ func TestMachineScope_RoleAssignmentSpecs(t *testing.T) {
 					Name:          "azure-role-assignment-name",
 					ResourceGroup: "my-rg",
 					PrincipalID:   ptr.To("fakePrincipalID"),
+					PrincipalType: armauthorization.PrincipalTypeServicePrincipal,
 				},
 			},
 		},
@@ -525,6 +527,7 @@ func TestMachineScope_RoleAssignmentSpecs(t *testing.T) {
 					Scope:            "/subscriptions/123/resourceGroups/my-rg",
 					RoleDefinitionID: "/subscriptions/123/resourceGroups/my-rg/providers/Microsoft.Authorization/roleAssignments/123",
 					PrincipalID:      ptr.To("fakePrincipalID"),
+					PrincipalType:    armauthorization.PrincipalTypeServicePrincipal,
 				},
 			},
 		},
diff --git a/azure/scope/machinepool.go b/azure/scope/machinepool.go
index 4204185326d..b7354bc9f53 100644
--- a/azure/scope/machinepool.go
+++ b/azure/scope/machinepool.go
@@ -24,6 +24,7 @@ import (
 	"io"
 	"strings"
 
+	"github.com/Azure/azure-sdk-for-go/sdk/resourcemanager/authorization/armauthorization/v2"
 	"github.com/pkg/errors"
 	corev1 "k8s.io/api/core/v1"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
@@ -798,6 +799,7 @@ func (m *MachinePoolScope) RoleAssignmentSpecs(principalID *string) []azure.Reso
 			Scope:            m.SystemAssignedIdentityScope(),
 			RoleDefinitionID: m.SystemAssignedIdentityDefinitionID(),
 			PrincipalID:      principalID,
+			PrincipalType:    armauthorization.PrincipalTypeServicePrincipal,
 		}
 		return roles
 	}
diff --git a/azure/scope/machinepool_test.go b/azure/scope/machinepool_test.go
index 95ab23e02c6..0f410516f8d 100644
--- a/azure/scope/machinepool_test.go
+++ b/azure/scope/machinepool_test.go
@@ -23,6 +23,7 @@ import (
 	"testing"
 
 	"github.com/Azure/azure-sdk-for-go/sdk/azidentity"
+	"github.com/Azure/azure-sdk-for-go/sdk/resourcemanager/authorization/armauthorization/v2"
 	azureautorest "github.com/Azure/go-autorest/autorest/azure"
 	"github.com/Azure/go-autorest/autorest/azure/auth"
 	. "github.com/onsi/gomega"
@@ -800,6 +801,7 @@ func TestMachinePoolScope_RoleAssignmentSpecs(t *testing.T) {
 					Name:          "role-assignment-name",
 					ResourceGroup: "my-rg",
 					PrincipalID:   ptr.To("fakePrincipalID"),
+					PrincipalType: armauthorization.PrincipalTypeServicePrincipal,
 				},
 			},
 		},
@@ -847,6 +849,7 @@ func TestMachinePoolScope_RoleAssignmentSpecs(t *testing.T) {
 					Scope:            "scope",
 					RoleDefinitionID: "role-definition-id",
 					PrincipalID:      ptr.To("fakePrincipalID"),
+					PrincipalType:    armauthorization.PrincipalTypeServicePrincipal,
 				},
 			},
 		},
diff --git a/azure/services/roleassignments/spec.go b/azure/services/roleassignments/spec.go
index 5fc574de45f..42b86629146 100644
--- a/azure/services/roleassignments/spec.go
+++ b/azure/services/roleassignments/spec.go
@@ -31,6 +31,7 @@ type RoleAssignmentSpec struct {
 	ResourceGroup    string
 	ResourceType     string
 	PrincipalID      *string
+	PrincipalType    armauthorization.PrincipalType
 	RoleDefinitionID string
 	Scope            string
 }
@@ -64,6 +65,7 @@ func (s *RoleAssignmentSpec) Parameters(ctx context.Context, existing interface{
 		Properties: &armauthorization.RoleAssignmentProperties{
 			PrincipalID:      s.PrincipalID,
 			RoleDefinitionID: ptr.To(s.RoleDefinitionID),
+			PrincipalType:    ptr.To(s.PrincipalType),
 		},
 	}, nil
 }