A new penalty framework
Cabinet Decision No. 129 of 2025 reformed the UAE's tax penalty framework, with effect from 14 April 2026. The aim is penalties that are more proportionate and that reward businesses for correcting errors early.
Late payment
Late payment of tax now accrues at a rate of 14% a year, charged monthly on the unpaid amount. This replaces the earlier structure of a fixed percentage on the due date followed by monthly percentages.
The longer tax stays unpaid, the more it costs, but the charge now grows steadily rather than in large steps.
Returns and disclosures
| Situation | Penalty |
|---|---|
| Late filing of a VAT return | AED 1,000; AED 2,000 for a repeat within 24 months |
| Incorrect return | AED 500 first time; AED 2,000 if repeated |
| Voluntary disclosure | 1% per month on the tax difference |
| Disclosure after an audit notice | An additional fixed 15% |
An incorrect-return penalty can be waived where the error is corrected in time or through a voluntary disclosure with no impact on the tax due.
How to protect your business
- Reconcile every return to your books before filing.
- Pay on time, even if you are still checking figures.
- If you find an error, disclose it before the FTA starts an audit.
- Keep a working file for each period that explains every box.
Call or WhatsApp us on +971 50 512 4558 to talk it through with our team.
This article is general information based on UAE rules as of November 2026 and is not tax advice. Rules change, so please WhatsApp us or call +971 50 512 4558 about your situation.