Cabinet Decision No. 129 of 2025.
On 14 April 2026 the UAE replaced its administrative penalty schedule across VAT, Excise Tax, and Corporate Tax. For VAT-registered businesses, two things moved at once: several fixed fines fell, and the way interest on late tax accrues was rebuilt. The headline reads like relief. But the figures decide what an overlooked obligation actually costs, which is where relief stops being the whole story.
The framework underneath is unchanged: VAT at 5%, mandatory registration at AED 375,000 of taxable supplies and imports over twelve months, voluntary registration at AED 187,500. Those thresholds are eligibility facts. What moved is the penalty regime behind them.
Five obligations, from 14 April 2026.
The penalties that apply now. Read them as the floor, not the bill. Total exposure depends on how many obligations were missed, and for how long.
Late VAT registration
Owed once you cross AED 375,000 in taxable supplies and imports over twelve months, or expect to within thirty days. It accrues alongside the unpaid tax, not instead of it.
No tax invoice or credit note issued
Halved, and genuine relief. But it is charged per document. An invoicing gap across hundreds of transactions still adds up to a large assessment from a small per-item figure.
Late VAT return filing
AED 1,000 the first time, AED 2,000 if it repeats within twenty-four months. The fine is the smaller problem: a late return usually sits on top of late payment.
Late VAT payment
On the unpaid tax, calculated monthly from the day after the due date. The most consequential change, and the one most likely to be running on a balance nobody flagged.
Voluntary disclosure of an under-declaration
A correction to a past return is made by voluntary disclosure to the FTA. The under-declaration charge is 1% per month on the tax difference, from the original return due date to the date you file. Wait until the FTA has issued an audit notice, and a further fixed 15% applies. The order the steps are taken changes what you pay, which is why this is not a form to file alone.
Late-payment interest, rebuilt.
The old charge compounded, so an unpaid balance could grow into a multiple of the tax. The new one is flat. The shape of that difference is the story.
Before: 2% upfront, then 4% per month
Compounding on the outstanding amount, the cost curved upward the longer it ran.
From 14 April 2026: 14% per annum, flat
Calculated monthly, it rises in a straight line. Lighter on a short delay, never harmless.
Resolve a short delay quickly and the flat charge treats you more kindly than the old one did. Let it run, and 14% a year on a meaningful balance is real money, with the tax still owed in full. The model changed. The discipline it rewards did not.
Not the people reading the rules carefully.
The businesses most exposed assumed VAT was handled and never went back to check. Three patterns come up again and again.
Over the threshold, not registered
Taxable supplies crossed AED 375,000 months ago, registration never followed. The AED 10,000 fine is already accruing, and so is the unpaid tax behind it.
Filing on time, paying late
Returns go in, the cash goes out late. The 14% per annum charge builds every month on the outstanding amount, on a balance nobody is watching.
A past error, undisclosed
An error has been spotted in an old return and nobody is sure whether, when, or how to disclose it. Every month of hesitation risks the audit notice and the extra 15%.
The revised figures change the arithmetic, not the principle: an unresolved VAT position does not improve by being left alone, and rarely surfaces on a schedule you choose.
The lower fines made it easier to assume you are fine. The work is confirming it.
A voluntary disclosure has to be characterised, sequenced, and timed. Done badly, it expands a liability instead of containing it. We read your registration status, your filing and payment position, and any past error against the revised framework, then tell you where you stand and what we would do if it were ours. If your VAT is current, you will hear that plainly, with no problem invented. If it is not, you will know the exposure before a penalty notice does.
Frequently asked questions.
When did the revised UAE VAT penalty framework take effect?
What is the late VAT registration penalty now?
How is the late VAT payment penalty calculated under the new rules?
Did the penalty for not issuing a tax invoice change?
What happens if we find a VAT error in a past return?
Are we still exposed if our VAT was already late before 14 April 2026?
Figures reflect Cabinet Decision No. 129 of 2025, published by the UAE Ministry of Finance and administered by the Federal Tax Authority. For how the registration threshold works in practice, see our UAE VAT registration guide and our Corporate Tax and VAT work.