# VAT Penalties in UAE: Complete List of Fines, Violations & How to Avoid Them

Late VAT payments can cost more than many businesses expect. Under the previous UAE VAT penalty regime, late payment penalties started at 2% of the unpaid tax on day one and could compound significantly.

UAE VAT penalties are governed by Cabinet Decision No. 129 of 2025. Effective 14 April 2026, this decision replaces the previous framework under Cabinet Decision No. 108 of 2021, including a shift to a 14% per annum late-payment penalty. Understanding the applicable VAT penalties, the violations that trigger them, and the steps to resolve them is essential for protecting your business from avoidable costs.

## Key Takeaways

1. Late VAT registration carries an AED 10,000 penalty.
2. Late VAT return filing remains AED 1,000 for a first offense and AED 2,000 for a repeat offense within 24 months.
3. Submitting an incorrect VAT return costs AED 500 under the new regime.
4. Under the old regime, late VAT payment penalties compounded quickly: 2% immediately, then 4% monthly, capped at 300%.
5. From 14 April 2026, late payment penalties shift to 14% per annum, calculated monthly on unpaid amounts.
6. Voluntary disclosure penalties are significantly reduced under the new regime, especially where businesses self-correct before audit notification.

## Overview of the UAE VAT Penalty Framework

The UAE VAT penalty system operates within a defined legal framework. Key provisions cover:

1. The Federal Tax Authority’s authority to impose administrative penalties.
2. Taxpayer obligations, including registration, filing, payment, and record-keeping.
3. The right to request reconsideration and appeal.
4. Statutes of limitation on penalty assessments.

## Old Penalties vs. New Penalties: What Changed?

Cabinet Decision No. 129 of 2025 replaces Cabinet Decision No. 108 of 2021. The key changes include:

| Violation | Old Penalty: CD 108/2021 | New Penalty: CD 129/2025 |
| --- | --- | --- |
| Late VAT registration | AED 10,000 | AED 10,000, unchanged |
| Late filing, first offense | AED 1,000 | AED 1,000, unchanged |
| Late filing, repeat within 24 months | AED 2,000 | AED 2,000, unchanged |
| Incorrect tax return, first offense | AED 1,000 | AED 500 |
| Failure to maintain records, first offense | AED 10,000 | AED 1,000 per violation |
| Failure to submit records in Arabic | AED 20,000 | AED 5,000 |
| Failure to notify FTA of changes, first offense | AED 5,000 | AED 1,000 per violation |
| Late payment, monthly rate | 2% immediately + 4% monthly | 14% per annum, applied monthly |
| Voluntary disclosure before audit | 5%–40% fixed penalty based on delay | 1% monthly on the tax difference |
| Voluntary disclosure after audit notification | 50% fixed + 4% monthly | 15% fixed + 1% monthly |
| Maximum late payment cap | 300% of unpaid tax | No cap; flat annual rate |

The new regime encourages voluntary compliance and early self-correction, particularly through reduced voluntary disclosure penalties.

## Complete List of Fixed VAT Penalties in the UAE

Fixed penalties are denominated in AED and apply to specific VAT violations.

### VAT Registration Violations

| Violation | Old Penalty: CD 108/2021 | New Penalty: CD 129/2025 |
| --- | --- | --- |
| Failure to register for VAT when required | AED 10,000 | AED 10,000, unchanged |
| Failure to submit deregistration application on time | AED 1,000 per month | AED 1,000 per month, up to AED 10,000, unchanged |

## VAT Return Filing Violations

The late filing penalty applies per return, not per day.

| Violation | First Offense | Repeat Offense Within 24 Months |
| --- | --- | --- |
| Late VAT return filing | AED 1,000 | AED 2,000 |
| Incorrect VAT return submitted | AED 500 | AED 500 |

No penalty applies for an incorrect return if the registrant corrects it within the filing deadline or submits a voluntary disclosure that results in no additional tax due.

The VAT filing deadline is the 28th day after the end of each tax period. Even a nil VAT return filed late can trigger a penalty.

## Record-Keeping Violations

| Violation | Old Penalty: CD 108/2021 | New Penalty: CD 129/2025 |
| --- | --- | --- |
| Failure to submit records in Arabic when requested | AED 20,000 | AED 5,000 |
| Failure to maintain required records, first offense | AED 10,000 | AED 1,000 per violation |
| Failure to maintain required records, repeat within 24 months | AED 20,000 | AED 20,000 |

Records that must be maintained include:

1. Tax invoices for sales and purchases.
2. Credit notes and debit notes.
3. Import and export documents.
4. Accounting records and general ledger.
5. Bank statements and payment records.
6. Contracts and agreements.
7. Stock and inventory records.
8. Any other documents specified by the FTA.

## Tax Invoice Violations

The penalty for a non-compliant tax invoice is AED 2,500 per invoice. Because this applies on a per-invoice basis, invoice compliance can create significant exposure. For example, 50 non-compliant invoices could result in AED 125,000 in penalties.

## Failure to Notify the FTA of Changes

| Violation | Old Penalty: CD 108/2021 | New Penalty: CD 129/2025 |
| --- | --- | --- |
| Failure to notify the FTA of required changes, first offense | AED 5,000 | AED 1,000 per violation |
| Failure to notify the FTA of required changes, repeat within 24 months | AED 10,000 | AED 5,000 |

Changes that must be reported within 20 business days include:

- Trade name.
- Address.
- Email.
- Business activities.
- Partnership structure.
- Any other registration information.

## Non-Cooperation With Tax Auditors

The penalty for non-cooperation with tax auditors is AED 20,000.

Under Cabinet Decision No. 129 of 2025, the scope of this violation has been broadened. It now applies more widely to any party that fails to facilitate a tax auditor, not only the person conducting business.

Cooperation means providing FTA auditors with access to business premises, records, systems, and personnel as requested.

## Other Fixed Penalties

1. Failure to display prices inclusive of VAT: AED 5,000.
2. Failure to notify the FTA of the appointment of a legal representative: AED 1,000, reduced from AED 10,000 under Cabinet Decision No. 108 of 2021.

## Percentage-Based VAT Penalties in the UAE

### Late VAT Payment Penalties

Before 14 April 2026, under Cabinet Decision No. 108 of 2021:

1. 2% of the unpaid tax applied immediately on the day after the payment due date.
2. 4% per month on the outstanding balance, applied on each monthly anniversary.
3. Maximum cap of 300% of the unpaid tax.

From 14 April 2026, under Cabinet Decision No. 129 of 2025:

- A flat rate of 14% per annum applies.
- The penalty is calculated monthly on the outstanding unpaid tax balance.
- This aligns VAT late-payment penalties with the Corporate Tax methodology.

## Voluntary Disclosure Penalties

A voluntary disclosure is a self-correction submitted to the FTA when a taxpayer discovers an error in a previously submitted tax return.

### Before FTA Audit Notification

Under Cabinet Decision No. 129 of 2025:

- A 1% monthly penalty applies on the tax difference.
- It is calculated from the day after the tax return due date until the date the voluntary disclosure is submitted.

### After FTA Audit Notification

Under Cabinet Decision No. 129 of 2025:

- A 15% fixed penalty applies on the tax difference.
- A 1% monthly penalty also applies on the tax difference.
- The monthly penalty is calculated from the day after the tax return due date until the voluntary disclosure is submitted, or until the tax assessment date if no voluntary disclosure is filed.

This is a significant reduction from the old regime, which imposed a 50% fixed penalty plus 4% monthly after audit notification.

## What to Do if You Receive a VAT Penalty in the UAE

### Step 1: Understand the Penalty Notice

An FTA penalty notice typically includes:

1. The specific violation cited.
2. The penalty amount imposed.
3. The legal basis, including the relevant article reference from Cabinet Decision No. 129 of 2025.
4. The deadline for payment or response.
5. Instructions for filing a reconsideration request.

### Step 2: Pay the Penalty or File a Reconsideration Request

If you accept that the violation occurred, pay the penalty within the specified timeframe, usually 20 business days.

If you believe the penalty is incorrect or unjust, you can file an FTA penalty reconsideration request within 20 business days. This is done through the EmaraTax portal and should include:

- A written explanation.
- Supporting documentation.
- Submission within the prescribed deadline.

The FTA must respond within 20 business days.

### Step 3: Escalate to the Tax Disputes Resolution Committee

If the FTA rejects your reconsideration request or does not respond within 20 business days, you can escalate the matter to the Tax Disputes Resolution Committee within 20 business days of the FTA’s decision.

### Step 4: Engage Professional Help

Consider engaging a tax advisor when:

1. The penalty amount is significant.
2. The matter involves complex technical issues.
3. You have received multiple penalties.
4. You are facing a tax audit.
5. You need support preparing a reconsideration request or TDRC objection.

BCL Globiz supports UAE businesses with VAT compliance services designed to reduce compliance risk, ensure accurate filings, and meet FTA deadlines.

## FAQs About VAT Penalties in the UAE

### What is the penalty for late VAT registration in the UAE?

The FTA imposes an AED 10,000 penalty for late VAT registration. This is triggered if a business fails to register within 30 days of exceeding the mandatory threshold.

### How much is the penalty for late VAT return filing in the UAE?

The penalty is AED 1,000 for a first offense and AED 2,000 for each subsequent offense within 24 months.

If a return is filed on time but contains an error, the penalty under Cabinet Decision No. 129 of 2025 is AED 500. No penalty applies if the error is corrected before the filing deadline or through a voluntary disclosure that results in no additional tax due.

### What happens if you do not pay VAT on time in the UAE?

From 14 April 2026, the late VAT payment penalty shifts to a flat 14% per annum, calculated monthly on the unpaid tax balance.

Before that date, the old compounding structure applied: 2% immediately, then 4% per month, capped at 300%.

### Can VAT penalties be waived or reduced in the UAE?

Taxpayers can file a reconsideration request within 20 business days of notification. If rejected, an appeal can be made to the Tax Disputes Resolution Committee within another 20 business days.

The authorities scrutinize the reasons for delay before approving reconsideration.

### What is a voluntary disclosure, and does it reduce VAT penalties?

A voluntary disclosure allows a taxpayer to correct an error in a previously submitted tax return.

Under Cabinet Decision No. 129 of 2025:

- Before audit notification, the penalty is 1% monthly on the tax difference from the original due date until the voluntary disclosure is submitted.
- After audit notification, a 15% fixed penalty applies, plus the 1% monthly variable penalty.

This is a major improvement over the previous 50% fixed penalty under Cabinet Decision No. 108 of 2021.

### I have losses during the year. Should I still worry about VAT returns?

Yes. VAT applies to taxable supplies, which are based on business revenue, not profit or loss. If taxable supplies are recorded during a rolling 12-month period, VAT registration and return filing may be mandatory.

### I delayed filing nil returns. Is a penalty still applicable?

Yes. Delayed filing of nil VAT returns can still attract penalties. VAT returns should be filed within 28 days from the end of the relevant tax period, whether the return is nil or not.