In order to support accurate tax return filing in the UAE, the Federal Tax Authority (FTA) has, over the years, introduced changes to the administrative penalties imposed for violations of UAE tax laws. Earlier, Cabinet Decision No. 49 of 2021 reduced several administrative penalties and amended the method for calculating late payment penalties.
However, the UAE administrative penalty framework has since been updated further. Cabinet Decision No. 129 of 2025, effective from 14 April 2026, introduced further amendments to the penalties under Cabinet Decision No. 40 of 2017 and its earlier amendments. The updated framework applies to tax procedure, VAT, and excise tax violations, and aligns the penalty regime with Federal Decree-Law No. 28 of 2022 on Tax Procedures.
Under the latest rules, several penalties have been reduced, and the late payment penalty has been simplified. The earlier compounding model has been replaced with a more predictable penalty of 14% per annum, calculated monthly on the outstanding payable tax.
What are the amendments made to administrative penalties for tax violations?
The UAE Cabinet has amended the administrative penalties for tax violations from time to time. The key amendments under the updated framework include the following:
- The penalty for failure to submit a VAT registration application within the timeframe specified under UAE VAT law remains AED 10,000.
- The penalty for failure to submit a VAT deregistration application within the specified timeframe remains AED 1,000 per month, up to a maximum of AED 10,000.
- The penalty for failure to submit data, records, and documents in Arabic when requested by the FTA has been reduced from AED 20,000 to AED 5,000.
- The penalty for failure to notify the FTA of amendments to tax registration records has been reduced to AED 1,000 for the first violation and AED 5,000 for repeated violations within 24 months.
- The penalty for failure by a legal representative to notify the FTA of their appointment within the specified timeframe has been reduced from AED 10,000 to AED 1,000.
- The penalty for submitting an incorrect tax return has been reduced to AED 500 for the first violation and AED 2,000 for repeated violations. The penalty may be waived if the tax return is corrected before the due date or through a voluntary disclosure that does not affect the tax due.
- The penalty for failure to issue a tax invoice, tax credit note, or alternative document within the legally specified period is AED 2,500 for each detected case.
Percentage-based penalties that apply to late payment of payable tax have also been amended. The previous model of 2% after the due date and 4% monthly thereafter has been replaced under the latest framework.
The updated late payment penalty is calculated as follows:
Note: The late payment penalty is now 14% per annum, calculated monthly on the outstanding payable tax.
Voluntary disclosure penalties have also changed. Instead of the previous fixed percentage range of 5% to 40%, the penalty is now generally calculated at 1% per month on the tax difference until the voluntary disclosure is submitted. If a voluntary disclosure is submitted after an FTA audit notification, an additional fixed penalty may apply.
The FTA continues to encourage tax registrants in the UAE to correct errors, submit voluntary disclosures where required, and comply with filing and payment deadlines. The updated rules are intended to make penalties more proportionate and easier for businesses to calculate.
As part of its awareness efforts, the FTA regularly issues public clarifications and guidance to help tax registrants understand their obligations. These clarifications help businesses apply tax rules more accurately and reduce the risk of administrative penalties. Businesses should consult regulated tax agents in Dubai for further clarification on the latest penalty rules.
How are penalties calculated?
Under the updated UAE tax penalty framework, penalties are calculated depending on the nature of the violation. For late payment of payable tax, the penalty is now calculated at 14% per annum, accrued monthly on the unpaid tax amount.
For voluntary disclosures, the penalty is generally calculated at 1% per month on the tax difference until the voluntary disclosure is submitted. If the disclosure is made after the FTA has issued an audit notification, an additional fixed penalty may apply.
The payment due date for calculating late payment penalties may depend on the type of case, such as:
- The due date for payment of tax as per the submitted tax return.
- The date specified in a tax assessment issued by the FTA.
- The applicable deadline after submission of a voluntary disclosure, where additional tax becomes payable.
Businesses should review the latest FTA guidance and Cabinet Decisions before calculating penalties, as the applicable treatment may vary depending on the tax period, type of violation, and timing of correction.
Read also: How VAT In UAE Affects Small Businesses?
What are the discounts for previously imposed administrative penalties?
Earlier, under Cabinet Decision No. 49 of 2021, eligible unpaid administrative penalties imposed before 28 June 2021 could be reduced to 30% if the registrant met certain conditions. These included settling all payable tax and paying 30% of the outstanding administrative penalties within the specified deadline.
However, this was a time-bound relief measure. The original deadline was 31 December 2021, and it was later extended to 31 December 2022 in certain cases. This relief is no longer a current general discount scheme.
At present, businesses should not rely on the old 30% penalty reduction unless they are dealing with a specific historical case where the FTA has confirmed eligibility. For current penalty matters, businesses should refer to the latest penalty framework and any available procedures for instalment, waiver, or refund of administrative penalties, where applicable.
VAT-registered businesses in the UAE can still benefit from the reduced and more proportionate penalty framework by maintaining proper records, filing tax returns on time, paying tax within the deadline, and correcting errors through voluntary disclosure where required.
Taxpayers are advised to evaluate the latest conditions and seek professional assistance to avoid unnecessary penalties.
To know more, talk to the regulated tax agents of VAT Registration UAE today!
