Understanding the Unified Administrative Penalty Regime in the UAE: 2026 Update (Cabinet Decision No. 129 of 2025)

How FTA Penalties Are Reduced From April 2026

The unified administrative penalty regime in the UAE, established under Cabinet Decision No. 129 of 2025, introduces major reforms to UAE tax penalties for VAT, Excise Tax, and Corporate Tax violations. Effective from 14 April 2026, the amendments simplify and harmonise penalties, reduce fines for minor administrative errors, and encourage voluntary disclosure of tax discrepancies. Key changes include reduced penalties for failing to submit records in Arabic, lower fines for late tax payments, updated penalties for incorrect tax returns, and proportional charges for voluntary disclosures. These reforms promote FTA tax compliance, enhance transparency, and provide businesses with a predictable and fair tax penalty framework in the UAE.

1. Failure to submit requested information in Arabic

• Old penalty: AED 20,000
• New penalty: AED 5,000

This change significantly reduces penalties for procedural non-compliance while still encouraging timely submission of records in the official language required by the FTA.

2. Failure to update tax records with the FTA

• Old penalty: AED 5,000 first time; AED 10,000 on repeat
• New penalty: AED 1,000 per violation; AED 5,000 if repeated within 24 months. This adjustment lowers the initial penalty dramatically and structures repeat violations within a 24-month window for consistency.

3. Failure to notify appointment of legal representative

• Old penalty: AED 10,000
• New penalty: AED 1,000, this change simplifies and reduces penalties when taxpayers fail to report legal representatives responsible for compliance.

4. Late payment of payable tax

• Old penalty: 2% immediately after due date and 4% monthly until payment (capped)
• New penalty: 14% per annum, calculated monthly on outstanding tax balances. This aligns VAT and Excise late payment penalties with the Corporate Tax methodology, offering a single, transparent rate rather than multiple layers of fees.

5. Incorrect tax return submitted

• Old penalty: AED 1,000 (first) / AED 2,000 (repeated) or potentially equal to tax difference
• New penalty:
• AED 500 (first violation)
• AED 2,000 (if repeated within 24 months)
• Penalty may be waived entirely if corrected by due date or by voluntary disclosure that doesn’t change the tax due

This reduces financial burdens for honest mistakes and rewards correct filings.

6. Voluntary Disclosure Amendments

• Old structure: Fixed penalty range of 5% – 40% depending on timing of submission
• New structure:
• 1% per month on tax difference until the voluntary disclosure is submitted
• If voluntary disclosure is filed after audit notice, an additional 15% penalty applies on top of the monthly charge

This makes penalties proportional to delay and incentivizes early self-correction.

7. Expanded penalty scope for audit facilitation

• The new regime clarifies that failure to facilitate an FTA audit can attract penalties for not only the taxpayer but also the tax agent or legal representative if they fail to cooperate

This strengthens enforcement and signals the importance of proper compliance support.

8. Additional clarification on record and invoice-related penalties

• Failure to issue tax invoice or tax credit note within the legally specified timeframe now attracts a penalty of AED 2,500 per detected case, reinforcing timely documentation practices.
• Certain record-keeping penalties have been reframed with clearer repeat-offence timeframes.

Why These Amendments Are Significant

• More predictable and business-friendly penalties – Fewer arbitrary fixed amounts and more proportionate, time-based charges.
• Promotes voluntary compliance and early corrections.
• Simplified enforcement and clearer definitions aligning with the tax procedures law.
• Reduced exposure for minor administrative errors while maintaining strong compliance for serious violations.