BAM Tax Advisors
The Administrative Penalties for Violation of Tax Laws in the UAE
Contents
01The Administrative Penalties for Violation of Tax Laws in the UAE
05Comparison of Key Penalty Categories
02Executive Summary
06Recommendations for Businesses
03Introduction
07Conclusion
04Key Tax Procedures Law Penalties under Cabinet Decision No. 129 of 2025 (Effective 14 April 2026)
08How Bazaar Accounting Can Support Your Business
01 | Executive Summary
Overview
UAE Cabinet Decision No. 129 of 2025 (effective 14 April 2026) overhauled the country's administrative penalty regime, simplifying and reducing many fines to encourage voluntary compliance. Key changes include:
- Replacing the old 2%/4% compounding late-payment penalties with a flat 14% per annum rate (applied monthly).
- Cutting standard fines (e.g. 20,000 AED → 5,000 AED for failing to submit Arabic documents).
- Introducing a linear 1% monthly penalty on the tax difference for voluntary disclosures (vs a tiered 5–40% range previously).
- The new framework also imposes lower fixed penalties and offers waivers if errors are corrected promptly.
These reforms aim to create a more transparent, predictable, and business-friendly tax environment.
02 | Introduction
Introduction
The UAE has enforced administrative penalties under Cabinet Decision No. 40/2017 (and its amendments) for violations of VAT, Excise, and Tax Procedures laws. Major amendments were introduced by Cabinet Decision No. 49/2021 and further revised by Decision No. 108/2021. The latest changes — Cabinet Decision No. 129 of 2025 (announced October 2025, in force April 2026) — seek to simplify penalty calculations, reduce undue burdens on businesses, and harmonize penalty treatment across tax laws. Below we compare the old and new regimes, focusing on key violation categories, and outline actionable recommendations for businesses.
03 | Key Penalties
Key Tax Procedures Law Penalties under Cabinet Decision No. 129 of 2025 (Effective 14 April 2026)
| Violation | New Penalty |
|---|---|
| Failure to maintain required records (Tax Procedures Law) | AED 10,000 (first), AED 20,000 (repeat). |
| Failure to provide Arabic records upon request | AED 5,000. |
| Failure to Register on time | AED 10,000. |
| Failure to Deregister on time | AED 1,000 initial penalty + AED 1,000 per month of delay (capped at AED 10,000). |
| Failure to Update tax record (inform change) | AED 1,000 per violation, AED 5,000 if repeated. |
| Failure to Notify legal representative appointment | AED 1,000. |
| Failure to File tax return on time | AED 1,000 (first); AED 2,000 (repeat). |
| Failure to Late payment of tax | 14% p.a. (approx. 1.17% monthly) on unpaid tax. |
| Submission of an Incorrect Tax Return | AED 500, unless the Registrant corrects the Tax Return within the prescribed filing deadline or submits a Voluntary Disclosure that does not result in any change to the Due Tax amount. |
| Tax Difference Disclosed through Voluntary Disclosure before Audit Notification | 1% per month on the tax difference from due date until VD submission. |
| Tax Difference Disclosed through Voluntary Disclosure after Audit Notification | 15% fixed penalty on tax difference Plus 1% per month until VD submission. |
| Failure to assist Tax Audit (Art. 20) | AED 20,000. |
| Failure to calculate tax on behalf of another | 14% p.a. (approx. 1.17% monthly) on unpaid tax. |
| Failure of the person to calculate any tax due on import of goods as per Tax Law | 50% of the unpaid or undeclared Tax. |
04 | Comparison
Comparison of Key Penalty Categories
| Violation | Old Penalty (Cabinet Decision Nos. 40/2017 & 49/2021) | New Penalty (Cabinet Decision 129/2025) | Impact / Notes |
|---|---|---|---|
| Failure to keep required records (Tax Procedures Law) | AED 10,000 for first violation; AED 20,000 if repeated. | Unchanged: AED 10,000 first; AED 20,000 repeat (within 24 months). | No change. Focus on compliance. |
| Failure to submit documents in Arabic when requested | AED 20,000. | Reduced: AED 5,000. | Major reduction; encourages compliance. |
| Failure to update tax record (inform changes) | AED 5,000 first; AED 10,000 repeated within 24 months. | Reduced: AED 1,000 per violation; AED 5,000 if repeated within 24 months. | Lowered entry and repeat fines; more proportionate. |
| Failure to notify appointment of Legal Representative | AED 10,000. | Reduced: AED 1,000. | Substantial cut, but penalty remains if violated. |
| Failure to register / deregister timely | Registration: AED 10,000. Deregistration: AED 1,000, plus AED 1,000 for each month of delay, capped at AED 10,000. | Registration: AED 10,000 (unchanged). Deregistration: AED 1,000 + AED 1,000/month (cap AED 10,000) (unchanged). | No change; businesses still must meet deadlines. |
| Late filing of tax returns by Taxpayers or Representatives | AED 1,000 first; AED 2,000 repeated within 24 months. | Unchanged: AED 1,000 first; AED 2,000 repeat (within 24 months). | No change; maintain timely filings. |
| Failure to Late Payment of Tax | 2% of unpaid tax immediately after due date, plus 4% per month (compounding, up to 300% cap). | New: 14% per annum, calculated monthly on unpaid tax balance. | Replaced the previous fixed and monthly percentage-based penalty mechanism with a 14% annual rate calculated monthly on the outstanding tax. |
| Incorrect tax return | AED 1,000 (first); AED 2,000 (repeat). | Reduced: AED 500 unless the registrant corrects the Tax Return within the filing deadline or submits a voluntary disclosure with no change in due tax. | Significantly lowered the penalty. |
| Voluntary Disclosure (VD) | Penalty from 5% to 40% of tax difference, depending on delay. | 1% per month (or part thereof) on the tax difference, from the day after the due date (or refund application) until the voluntary disclosure is submitted. | More predictable, encourages earlier correction. |
| Voluntary Disclosure after audit notification | 50% of tax (fixed) + monthly (similar to Voluntary Disclosure) penalty. | Reduced: 15% fixed on the tax difference, plus 1% per month (or part thereof) from the day after the due date (or refund application) until VD submission or, if no VD is filed, until the tax assessment is issued. | Significantly lower fixed component (15% vs 50%). |
| Failure to assist in audit (Article 20 violations) | AED 20,000. | Unchanged: AED 20,000. | No change. Focus on compliance. |
| Failure to calculate tax on behalf of another | 2% due + 4% monthly (similar to late payment). | New: 14% per annum, calculated monthly on unpaid tax balance. | Replaced the previous fixed and monthly percentage-based penalty mechanism with a 14% annual rate calculated monthly on the outstanding tax. |
| Failure to account for import of goods | 50% of the unpaid or undeclared Tax. | 50% of the unpaid or undeclared Tax. | No change. |
05 | Recommendations
Recommendations for Businesses
1
Review and Update Compliance Systems
- Ensure all accounting and ERP systems generate Arabic-language tax records upon request (penalty reduced to 5,000 AED, but still enforceable) and automatically update registration/deregistration and legal representative details within deadlines.
2
Strengthen Record-Keeping
- Maintain complete tax records, as penalties for missing records remain high (AED 10k/20k). Regular internal audits can catch record-keeping gaps early.
3
Train Staff on Changes
- Update finance/legal teams on the new penalty rates and thresholds. Internal checklists should reflect waived penalties if corrected promptly.
4
Voluntary Disclosures (VD)
- Leverage the new VD regime: 1% monthly on tax differences is more favorable than fixed-rate penalties. Encourage early self-disclosure of errors to avoid higher fines, especially before FTA audits.
5
Timely Filing & Payment
- With no grace on late filing (1k/2k AED) and new interest on late tax (14% p.a.), schedule returns and payments well before deadlines. Late payment interest is now predictable (≈1.17% monthly) but still significant.
6
Prepare for Extended Audit Powers
- Despite some relaxed fines, the FTA emphasizes record transparency. Cooperate fully with audits to avoid the unchanged AED 20k penalty for obstruction and be prepared for an audit.
06 | Conclusion
Conclusion
Summary
The UAE's revised penalties regime significantly reduces fines for many common tax compliance lapses while simplifying calculation (e.g. flat interest vs compounding). Businesses benefit from lower costs for small errors and clear rules for voluntary disclosures but must adapt to new flat rate interest and maintain rigorous compliance to avoid remaining high fines. Early action — updating processes, training staff, and correcting past mistakes via voluntary disclosures — will help organizations take full advantage of the more business-friendly framework.
07 | How Bazaar Accounting Can Support Your Business
How Bazaar Accounting Can Support Your Business
1
Compliance Health Checks & Risk Reviews
We conduct detailed reviews of your current tax processes to identify gaps in:
- Record-keeping, VAT and Excise compliance, Filing and payment timelines.
2
ERP & Accounting System Alignment
We assist in:
- Ensuring your systems can generate Arabic-language tax records upon request and Integrating tax controls within your ERP.
3
VAT Compliance Management
Our team supports:
- Accurate and timely tax return preparation and submission, Ongoing compliance monitoring and Advisory on complex transactions.
4
Voluntary Disclosure (VD) Strategy & Execution
We help businesses:
- Identify errors early through internal reviews, quantify tax exposure, Prepare and submit Voluntary Disclosures efficiently.
5
Ongoing Advisory & Training
We provide:
- Regular updates on UAE tax law changes and if required provide staff training sessions on compliance requirements along with a tailored guidance for your business model.
This article is prepared by Bazaar Accounting & Management Advisors LLC (BAM Tax Advisors) for general information purposes only. It does not constitute legal or tax advice. Readers should seek professional advice specific to their own circumstances before taking any action based on the content herein.