UAE Tax Penalties: What Changed from 14 April 2026

From 14 April 2026, the administrative penalties for breaking the UAE Tax Procedures Law changed. Cabinet Decision No. 129 of 2025 amended Cabinet Decision No. 40 of 2017, which sets the penalties for VAT and Excise Tax, and the new amounts apply to violations from that date.

The overall direction is clear: penalties for paying late and for correcting your own errors are now lower and more predictable, while the basic fixed penalties mostly stay the same.

Late payment: a flat 14% a year

Before: 2% of the unpaid tax immediately, then 4% a month starting one month after the due date, up to a maximum of 300% of the unpaid tax.

Now: 14% a year, calculated monthly on the unpaid tax, for as long as it remains unpaid.

For a business that pays a few weeks late, this is a big reduction. It also means the cost grows steadily rather than in large steps, so paying as soon as you can always helps.

Voluntary disclosures: 1% a month

If you find an error in a return you already filed and correct it with a voluntary disclosure before the FTA notifies you of an audit, the penalty is now 1% of the tax difference for each month since the original due date.

Before, it was 5% to 40% of the tax difference, depending on how long after the due date you made the disclosure.

Errors found after an audit notice

If the FTA has already notified you of an audit, or you disclose during the audit, the penalty is 15% of the tax difference plus 1% for each month.

Before, the fixed part was 50%, plus 4% a month. Disclosing your own errors early is still much cheaper than waiting for the FTA to find them.

Fixed penalties that stay the same

Late registration: AED 10,000
Late deregistration: AED 1,000 a month, up to AED 10,000
Incorrect return: AED 500, unless corrected before the due date
Not keeping the required records: AED 10,000, or AED 20,000 for a repeat

Some other fixed penalties were reduced. For example, the penalty for not providing documents in Arabic when the FTA asks fell from AED 20,000 to AED 5,000.

What about Corporate Tax?

Corporate Tax penalties are set separately in Cabinet Decision No. 75 of 2023. Check those rules on their own rather than assuming the VAT changes apply.

What to do now

Review past returns for errors. A voluntary disclosure now costs far less than it used to.
Pay on time where you can. At 14% a year, late payment is still an expensive form of credit.
If you have older penalties, look at the FTA's penalty waiver and instalment service.
Keep records organised: the record-keeping penalty did not fall.

How Dreambooks helps

Dreambooks reconciles your VAT returns to your ledger every period, so differences are found before the FTA finds them, and keeps the records the FTA can ask for in one place.

Official sources

This article is general information as of August 2026, not tax advice. Check the current penalty rules and the latest FTA guidance, or speak to your tax adviser, before acting.

The UAE's New Tax Penalty Rules: What Changed from 14 April 2026