The UAE has amended its rules concerning tax penalties. Cabinet Decision No. 129 of 2025 became effective from 14th April 2026. It modifies the administrative penalties set forth by the Tax Procedures Law, Value Added Tax (VAT) Law, and Excise Tax Law.
The Federal Tax Authority (FTA) has announced the modification. It aims to assist taxable persons, decrease the financial burden, encourage voluntary compliance, and facilitate correction. This change is in line with the UAE’s approach to the tax system that favors businesses.
Below are five crucial modifications for all business entities in the UAE (mainland, free zones, or others).
The following information is based on the official announcement by the FTA and Cabinet Decision.
1. Lower Penalty for Submitting Tax Records in Arabic
Earlier, failure to provide data, records, or tax documents in Arabic when required by the FTA was punishable with an administrative fine of AED 20,000.
New regulation: The penalty has now been reduced to AED 5,000.
This is a major reduction in the penalty. Companies will still have to maintain their records and be prepared to provide them in Arabic when demanded. The new lower penalty makes it less expensive.
2. Reduced Fines for Failing to Update Tax Records
If a registrant fails to inform the FTA about the changes to their tax account (for example, if there are changes to their address, contact information, or any other registration details), the penalty under the old rules was AED 5,000 for the first offense and AED 10,000 for any subsequent offenses.
New regulation:
- AED 1,000 per offense
- AED 5,000 if the same violation is repeated within 24 months of the last one
It is important to keep your EmaraTax profile updated. This new penalty system reduces the burden of the first-time penalty, but if you commit the same mistake multiple times, the cost increases.
3. Reduced Penalty for the Legal Representative
A legal representative of a taxable person had previously been fined AED 10,000 for not informing the FTA of their appointment within the required time frame, and this fine had to be paid from the representative’s own funds.
The new rule provides that the fine is now AED 1,000 and must still be paid out of the legal representative’s own personal funds.
The change reduces the personal risk to company directors, managers, or appointed representatives at the same time as holding them accountable.
4. Revised and Easier-to-Calculate Late Payment Penalty
This is probably the most practically valuable change.
Old system: The penalty was 2% of the tax due immediately after the deadline, plus an additional 4% per month (in a way compounding and reaching higher amounts, capped in some cases).
New system: A monthly penalty calculated at an annualised rate of 14% on the unpaid tax amount (approximately 1.17% per month). It is non-compounding and applies from the day following the due date until the tax is paid.
5. Easier and Lower-Cost Voluntary Disclosure Plus Reduced Incorrect Return Penalty
With the new regulations, it is more profitable to make corrections on your own.
Wrong Tax Return: The penalty is now AED 500 for the first violation and AED 2,000 for repeated violations (previously AED 1,000 for the first instance and AED 2,000 for repeat offenses). There is no penalty for correcting a wrong tax return before its deadline or for a voluntary disclosure that does not result in any change in the tax amount payable.
Voluntary Disclosure: Instead of the percentage-based tiered system (5% to 40% according to the length of delay), a new 1% per month penalty rate has been implemented. The calculation of penalties starts from the day after the tax return (or application) deadline and ends when the voluntary disclosure is made.
Failure to make voluntary disclosure upon being audited by the tax authorities: A fixed penalty of 15% of the tax difference plus the continuing 1% monthly penalty applies.
The cost of disclosure is now considerably lower than the cost of being audited.
What These Changes Mean for Your Business
The UAE wants voluntary compliance and early corrections. While penalties are less strict and easier to calculate for many day-to-day administrative offences, the obligations have not gone away.
Recommended actions:
- Check your tax registration information in EmaraTax and amend any details that are out of date.
- Ensure that you can provide documentation in Arabic if necessary.
- Improve your company’s processes for VAT/Excise payments and reporting.
- If you suspect that there have been errors in the past, then it might be worth carrying out a voluntary disclosure review.
- Check whether you have properly notified the FTA about your representatives’ authorization to act on your behalf.
The rules concern offences which take place on or after 14 April 2026. However, in certain circumstances older penalties could still be applied to earlier periods.
Frequently Asked Questions
When did the UAE’s revised tax penalty rules come into effect?
Cabinet Decision No. 129 of 2025 came into effect on 14 April 2026, introducing amendments to administrative penalties under the UAE Tax Procedures Law, VAT Law, and Excise Tax Law. Businesses should review the revised rules to understand how they apply to their tax obligations.
What is the new penalty for failing to update tax registration details with the FTA?
Under the revised rules described in this guide, the penalty is AED 1,000 per violation, increasing to AED 5,000 if the same violation is repeated within 24 months of the previous one. Businesses should keep their registration details updated through the EmaraTax portal.
How has the UAE changed late tax payment penalties?
The revised framework introduces a non-compounding late payment penalty calculated at an annualised rate of 14% on unpaid tax, equivalent to approximately 1.17% per month. The penalty generally runs from the day after the payment deadline until the outstanding tax is paid, subject to the applicable rules.
What is the new penalty for submitting a voluntary disclosure in the UAE?
The revised framework introduces a monthly penalty of 1% of the relevant tax difference for voluntary disclosures, calculated from the day after the applicable tax return or application deadline until the disclosure is submitted. Additional penalties may apply in cases involving an audit, depending on the circumstances.
How can businesses in Dubai avoid FTA tax penalties?
Businesses should regularly review their tax registration details, file VAT and corporate tax returns accurately and on time, pay outstanding tax by the applicable deadlines, maintain supporting records, and correct errors promptly. Business Tax UAE can assist with tax compliance reviews, penalty calculations, voluntary disclosures, and consultations to help businesses meet their UAE tax obligations.
Stay Compliant and Protect Your Business
As tax rules evolve, even lower penalties can become costly if ignored. Proper understanding of the new framework is essential to avoid unnecessary financial burden and promote responsible practices.
Need assistance with either assessing your tax position or making a voluntary disclosure under the new schedule? Contact our tax consultants in Dubai at Business Tax UAE today.
We support businesses throughout the UAE with FTA issues, penalty calculations, voluntary disclosures, and ongoing compliance consultations.
Call us for a confidential discussion about your circumstances.