Revision in Administrative Penalties for Violation of Tax Laws in the UAE

The Federal Tax Authority (‘FTA’) has issued Cabinet Decision No. 129 of 2025 introducing major reforms to the UAE’s administrative penalties under VAT and Excise Tax. Effective from 14 April 2026, the decision revises penalties for various non-compliance such as late registration, delayed filings, and inadequate record-keeping.
The decision introduces updates to certain definitions under the previous Cabinet Decision No. 40 of 2017. Key changes include:

Tax Law: For the purposes of this decision, Tax Law refers to Excise Tax Law and the VAT Law only.
Tax Difference: Defined as the difference between the Due Tax as calculated and the Due Tax as it should have been calculated. This definition is particularly relevant for determining penalties related to the submission or non-submission of Voluntary Disclosures.

The comparative table below outlines the key differences between the previous and updated penalty provisions.

Sr.No.	Violation Type	Penalty until 13 April 2026	Penalty from 14 April 2026	Key Change
1	Failure to keep the required records and other information as specified in the Tax Procedures Law and the Tax Law.	AED 10,000 for the first time. AED 20,000 in case of repetition.	One of the following two penalties shall be imposed: AED 1,000 for each violation. AED 20,000 in each case of repeated violation within 24 months.	Significant reductions has been introduced for first time violations.
2	Failure to submit the data, records, and documents related to tax in Arabic to the Authority when requested.	AED 20,000	AED 5,000	Penalty has been lowered.
3	Failure to inform the Authority of any amendment of the information pertaining to its Tax record.	AED 5,000 for the first time. AED 10,000 in case of repetition.	One of the following two penalties shall be imposed: 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 penalty amount for first time violation. The penalty will be determined based on each violation.
4	Failure to notify of appointment of the Legal Representative of the Taxable Person to provide Notification.	AED 10,000	AED 1,000	Penalty has been lowered.
5	Failure to settle the Payable Tax within the timeframe specified in the Tax Law	2% of the unpaid Tax after due date 4% monthly penalty is due after one month from the due date of payment, until paid.	A monthly penalty of 14% per annum, for each month or part thereof if no settlement made after due date.	The penalty for late payment has been revised to align with the same penalty provision under Corporate Tax Law. No changes in the calculation of due date for payment in case of Voluntary disclosure and Tax Assessment.
6	The submittal of an incorrect Tax Return by the Registrant	AED 1,000 for the first time. AED 2,000 in case of repetition	AED 500 However, no penalty shall be applicable if: the Registrant corrects his Tax Return within the deadline specified for submitting the Tax Return or Submits a Voluntary Disclosure to correct the Tax Return without resulting in any due tax.	Lowered fixed penalties for incorrect Tax returns.
7	The submittal of a Voluntary Disclosure (‘VD’) by the Taxpayer on errors in the Tax Return	5% on the difference, if VD submitted within one year from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 10% on the difference, where the VD is submitted within the second year following the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 20% on the difference, where the VD is submitted within the third year following the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 30% on the difference, where the VD is submitted within the fourth year from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application; 40% on the difference, where the VD is submitted after the fourth year from the due date of submission of the Tax Return, the Tax Assessment, or the relevant refund application.	A monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be applied as of the date following the due date of the Tax Return, or submission of the relevant tax refund application until the date of the VD is submitted.	The slab-based approach has been replaced with monthly penalty calculation promoting quicker identification and resolution of errors and omissions in Tax returns and refund application.
8	Failure of the Taxable Person or the Taxpayer to submit a VD in relation to errors in the Tax Return, Tax Assessment, or tax refund application before being notified by the Authority that it will be subject to a Tax Audit.	A penalty of 50% on the amount of error. A penalty of 4% for every month or part of the month, of the following: a. The unpaid Tax to the Authority, from the date the payment is due until the date of receipt of the Tax Assessment. b. The Tax that was not returned to the Authority due to ineligible refund, from the date of Tax refund until the date of receipt of the Tax Assessment.	The two following penalties shall be imposed: A fixed penalty of 15% on the Tax Difference. A monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be calculated as follows: a. Where the Taxable Person submits a VD after being notified that it will be subject to a Tax Audit by the Authority, the penalty shall be imposed for the period from the day following the due date of the Tax return, or the submission of the relevant tax refund application until the date of submitting the VD. b. Where the Taxable Person fails to submit a VD, the penalty shall be imposed as of the date following the due date of the Tax Return, or the submission of the relevant tax refund application until the date of issuance of the Tax Assessment.	The fixed penalty of 50% is reduced significantly to 15% and the monthly penalty is also reduced to 1%. Further, the FTA has defined the time till when the penalty will be calculated in case VD is filed after receipt of Tax Assessment notice.
9	Failure of the Registrant to calculate tax on behalf of another Person where the Registrant Taxable Person is obliged to do so under the Tax Law	2% of the unpaid Tax is due on the day following the due date of payment 4% monthly penalty is due after one month from the due date of payment.	A monthly penalty of 14% per annum, for each month or part thereof on the unsettled amount of Payable Tax, from the day following the due date of payment.	Average monthly penalty has been revised and calculation methodology is same as late payment penalty.

BDO Insights:

The updated administrative penalties introduce a more balanced approach:

Reduced penalties for first-time offenses and for errors or omissions that are identified and corrected promptly;
Strict penalties remain in place for repeated or serious violations.

This framework encourages businesses to adopt a proactive approach on tax compliance.
We at BDO are dedicated to helping companies adapt to these changes seamlessly and stay up-to-date with the tax requirements. Our services include:

Tailored compliance reviews
Health checks on VAT and Excise Tax positions
Ongoing return support to ensure full alignment with FTA regulations.