Dec 04, 2025 
VAT
UAE VAT administrative penalty update: A Fairer and simpler penalty system from 14 April 2026
As per the recent Cabinet Decision No. 129 of 2025, the FTA is making the administrative penalty fairer, clearer, and easier to understand. The new system replaces complicated, compounding penalties with a simple time-based approach, so businesses can easily see how penalties are calculated and plan better. The updated penalties are taking effect from 14 April 2026.
These updates also encourage honesty and voluntary corrections. If a business spots an error and fixes it early, the penalties will be lighter and more predictable. The changes bring VAT and Excise Tax rules closer together, reducing confusion and helping businesses stay compliant with less stress.
In this blog, we’ll look at what’s new and comparison with the existing penalties, how the penalties have changed, and what this means for businesses across the UAE.
Main Changes:
- Late payment penalty: Abolishes 2% initial + 4% monthly (max 300%); replaces with non-compounding 14% per annum (1.167%/month) on unsettled amount from day after due date.
- Voluntary Disclosures (VD): Replaces yearly brackets (5 to 40%) with 1% per month on tax difference from original due date.
- Submission of VD after FTA’s notice: Fixed penalty slashed from 50% to 15% + 1% monthly (was 4%) on tax difference.
- Submission of incorrect tax return: Reduced to AED 500 from 1,000 for the first time and 2,000 in case of repetition.
| On Violations and Administrative Penalties related to the Implementation of Tax Procedures Law | ||
| Violation | New Penalty | Previous Penalty |
| Failure to maintain the records and information required under the Tax Procedures Law and Tax Law. | AED 10,000 for each violation. AED 20,000 in each case of repeated violation within 24 months from the date of the last violation. | 10,000 for the first time. 20,000 in case of repetition |
| Failure to submit tax-related data, records, and documents in Arabic to the Authority upon request. | AED 5,000 (reduced) | AED 20,000 |
| Failure to submit a tax registration application within the specified timeframe. | AED 10,000 | AED 10,000 |
| Failure to submit a tax deregistration application within the specified timeframe. | AED 1,000 in case of late submission of the application and on the same date monthly, up to a maximum of AED10,000. | AED 1,000 in case of late submission of the application and on the same date monthly, up to a maximum of AED 10,000. |
| Failure to notify the Authority of any changes requiring amendment of the registrant’s tax record. | 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 (reduced) | AED 5,000 for the first time and AED 10,000 in case of repetition. |
| Failure of the Legal Representative to notify their appointment within the specified timeframe, making them personally liable for the penalties. | AED 1,000 (reduced) | AED 10,000 |
| Failure of the Legal Representative to file a Tax Return within the specified timeframe, with penalties payable from their own funds. | AED 1,000 for the first time. AED 2,000 in case of repetition within 24 months. | AED 1,000 for the first time. AED 2,000 in case of repetition within 24 months. |
| Failure of the Registrant to submit the Tax Return within the specified timeframe. | AED 1,000 for the first time. AED 2,000 in case of repetition within 24 months. | AED 1,000 for the first time. AED 2,000 in case of repetition within 24 months. |
| Failure of the Taxable Person to settle the Payable Tax within the timeframe specified in the Tax Law | A monthly penalty of 14% per annum applies to the unsettled Payable Tax, calculated from the day after the due date and on the same date each subsequent month. For this penalty, the due date of payment is:
| 2% of the unpaid tax is due immediately. 4% monthly penalty is due after one month from the due date of payment, and on the same date monthly thereafter, on the unsettled Tax amount to date. |
| The Registrant submits an incorrect Tax Return. | AED 500, unless the Registrant:
(reduced) | AED 1,000 for the first time and AED 2,000 in case of repetition. |
| The submission of a Voluntary Disclosure by the Taxable Person or the Taxpayer on errors in the Tax Return, Tax Assessment or tax refund application pursuant to Clauses 1 and 2 of Article 10 of the Tax Procedures Law. | A monthly penalty of 1% on the Tax Difference, applied from the day after the Tax Return due date or tax refund application submission, until the Voluntary Disclosure is submitted. (changed) | 1. 5% on difference if VD is submitted within one year 2. 10% on difference if VD is submitted within two years 3. 20% on difference if VD is submitted within three years 4. 30% on difference if VD is submitted within four years 5. 40% on difference if VD is submitted after four years |
| The failure of the Person/Taxpayer to voluntarily disclose an error in the Tax Return, Tax Assessment, or refund application pursuant to Article 10 (1) and 10(2) of the Tax Procedures Law before being notified by the Authority that it will be subject to a Tax Audit. | 1. A fixed penalty of 15% on the Tax Difference. 2. A monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be calculated as follows: (reduced) | 1. A penalty of 50% on the amount of error. 2. A penalty of 4% for every month or part of the month, of the following: |
| Failure of the Taxable Person, their Tax Agent, or Legal Representative to facilitate the Tax Auditor in accordance with Article 20 of the Tax Procedures Law, with penalties payable from their own funds, as applicable. | AED 20,000 | AED 20,000 |
| Failure of the Registrant to calculate tax on behalf of another person when required to do so under the Tax Law. | A monthly penalty of 14% per annum applies to the unsettled Payable Tax, calculated from the day after the due date and on the same date each month thereafter. For this penalty, the due date of payment is: (reduced) | The Registrant must pay penalties for late settlement of Payable Tax, up to a maximum of 300%, as follows: a. 2% of the unpaid Tax is due the day after the due date of payment. b. 4% monthly penalty on the unsettled Tax, starting one month after the due date and on the same date each subsequent month.For this penalty, the due date of payment is: a. 20 business days from submission for a Voluntary Disclosure. b. 20 business days from receipt for a Tax Assessment. |
| The failure of the Person to calculate any tax that may be due on the import of goods as per the Tax Law. | 50% of the unpaid or undeclared Tax. | 50% of the unpaid or undeclared Tax. |
| On Violations and Administrative Penalties related to the Implementation of Federal Decree-Law No. 7 of 2017 on Excise Tax | ||
| Violation | New Penalty | Previous Penalty |
| Failure of the Taxable Person to display prices inclusive of Tax. | AED 5,000 | AED 5,000 |
| Failure to comply with the conditions and procedures of transferring Excise Goods from a Designated Zone to another Designated Zone, and the mechanism of preserving, storing, and processing such Excise Goods. | The penalty shall be the higher of AED 50,000 or 50% of the Tax, if applicable, chargeable on the goods in relation to the violation. | The penalty shall be the higher of AED 50,000 or 50% of the Tax, if applicable, chargeable on the goods in relation to the violation. |
| Failure of the Taxable Person to provide the Authority with the price lists of the Excise Good that it produces, imports or sells. | AED 5,000 for the first time. AED 10,000 in case of repetition. | AED 5,000 for the first time. AED 10,000 in case of repetition. |
| On Violations and Administrative Penalties related to the Implementation of Value Added Tax Law | ||
| Violation | New Penalty | Previous Penalty |
| Failure of the Taxable Person to display prices inclusive of Tax. | AED 5,000 | AED 5,000 |
| Failure to comply with the required conditions and procedures related to keeping the Goods in a Designated Zone or moving them to another Designated Zone. | The penalty shall be the higher of 50,000 or 50% of the Tax, if applicable, chargeable on the goods in relation to the violation. | The penalty shall be the higher of 50,000 or 50% of the Tax, if applicable, chargeable on the goods in relation to the violation. |
| Failure of the Taxable Person to notify the Authority of applying tax based on Margin. | AED 2,500 | AED 2,500 |
| Failure of the Taxable Person to issue a Tax Invoice or the alternative document when making any supply within the period legally specified. | 2,500 for each detected case. | AED 2,500 for each detected case |
| Failure of the Taxable Person to issue a Tax Credit Note or the alternative document within the period legally specified. | AED 2,500 for each detected case. | AED 2,500 for each detected case |
| Failure of the Taxable Person to comply with the conditions and procedures regarding the issuance of a Tax Invoice and a Tax Credit Note electronically. | AED 2,500 for each detected case. | AED 2,500 for each detected case |
Why Choose Spectrum Auditing?
At Spectrum Auditing, we go beyond just being an auditing firm; we’re your trusted partner in navigating the ever-evolving landscape of UAE regulations. Here’s what sets us apart:
- Unparalleled Expertise: Our team consists of accredited auditors, management accountants, consultants with in-depth knowledge of UAE laws, ensuring your business remains compliant.
- Streamlined Solutions: We take a comprehensive approach, guiding you through every step of the process, from risk assessment to filing reports.
- International Recognition: Be audits or any type of compliance, we adhere to the highest standards (ISA, IAS, IFRS), providing global credibility.
- Personalized Support: We understand every business is unique. We tailor our services to address your specific needs and answer any questions you may have.
Partner with Spectrum Auditing today. Let’s focus on your success, while you focus on what you do best – running your business.
Contact us today for a consultation at +971 4 2699329 or email [email protected] to get all our queries addressed.
