Cabinet Decision No. 129 of 2025 has rewritten the UAE's VAT and Excise Tax penalty table, in force since 14 April 2026 — cutting several fixed fines and replacing steep percentage penalties with simpler monthly rates. Here's exactly what changed, what didn't, and how Corporate Tax penalties fit in.
Since 14 April 2026, VAT and Excise Tax violations in the UAE have been assessed under a substantially revised penalty table. Cabinet Decision No. 129 of 2025 amends Cabinet Decision No. 40 of 2017 — the original administrative penalties framework, itself previously amended by Cabinet Decision No. 49 of 2021 and Cabinet Decision No. 108 of 2021 — moving away from steep, compounding percentage penalties toward a simpler, more predictable structure. Corporate Tax penalties are not part of this particular amendment; they remain governed separately by Cabinet Decision No. 75 of 2023, as amended by Cabinet Decision No. 10 of 2024. This post covers exactly what moved, and what a business in any of the three tax types should actually check.
From Compounding to a Flat Annual Rate on Late Payment
The single biggest mechanical change is how late payment of tax is penalized. Previously, unpaid tax attracted a 2% immediate penalty on the due date, followed by 4% monthly on any amount still outstanding, which could compound up to a 300% cap over time. Under the reform, late payment instead accrues at a flat 14% per annum, calculated and applied monthly — a materially simpler calculation, and in most realistic timeframes a smaller total charge than the old compounding structure produced.
Voluntary Disclosure Gets Cheaper — And Simpler
Correcting a past error before the FTA catches it has always been the cheaper path, and the reform sharpens that incentive. Previously, voluntary disclosure penalties were assessed in fixed percentage bands (5% up to 40% of the tax difference) depending on how much time had passed since the error. Under the regime in force since 14 April 2026, a voluntary disclosure made before the FTA notifies the business of an audit is instead penalized at 1% of the tax difference for every month since the original due date — a single, easy-to-calculate rate rather than a banded lookup. If the disclosure comes after the FTA has already given audit notification, the calculation is 15% fixed plus 1% per month, a meaningfully steeper starting point that preserves the incentive to disclose early.
A business discovers in July 2026 that it under-declared AED 150,000 of VAT for a period nine months earlier, before the FTA has opened any audit or sent a notification. Disclosing voluntarily now, the penalty is 1% of the AED 150,000 tax difference for each of the nine months since the original due date — roughly 9%, or about AED 13,500. Had the FTA already issued an audit notification before the disclosure, the calculation would instead start from a 15% fixed penalty plus 1% per month, a substantially higher starting point — illustrating why disclosing before any FTA contact remains the materially cheaper path under the new rules, just as it was under the old ones.
Smaller Fixed Penalties for Administrative Slip-Ups
- Failure to submit information or records to the FTA in Arabic when requested: reduced from AED 20,000 to AED 5,000
- Failure to keep the FTA updated with tax record changes (e.g. business name, address, activity): reduced from AED 5,000 (first) / AED 10,000 (repeat) to AED 1,000 / AED 5,000
- Late notification of a legal representative's appointment: reduced from AED 10,000 to AED 1,000
- Submitting an incorrect tax return: reduced to AED 500 for a first occurrence and AED 2,000 for repeat occurrences, and waived entirely if corrected before the return's due date
- Failure to issue a tax invoice or credit note: AED 2,500 per detected instance, with a new 14-day compliance window before the penalty is triggered
The 200% Statutory Cap Still Applies
One thing the reform does not touch: Article 24(4) of the Tax Procedures Law (Federal Decree-Law No. 28 of 2022) still caps the total administrative penalties arising from a single tax assessment at 200% of the due tax. Whatever the individual violation penalties add up to under the new table, that statutory ceiling remains the ultimate backstop.
Corporate Tax Penalties Are a Separate Framework
It's worth being precise here: Cabinet Decision No. 129 of 2025 amends the VAT and Excise Tax penalty table specifically. It does not restructure Corporate Tax penalties, which continue to sit under Cabinet Decision No. 75 of 2023 (as amended by Cabinet Decision No. 10 of 2024) — including the flat AED 10,000 late-registration penalty. The philosophy behind the two frameworks is now more closely aligned than before, but the actual percentages and fixed amounts for VAT and Excise Tax should not be assumed to carry over to a Corporate Tax calculation without checking the Corporate Tax-specific decision.
What To Check Now That It's in Force
- Confirm the date of the underlying violation before applying either penalty table — the 14 April 2026 effective date is not retroactive, so errors from before that date are still assessed under the prior Cabinet Decision No. 40 of 2017 framework as it stood at the time
- Review any pending or in-progress voluntary disclosures to confirm which regime applies and recalculate the expected penalty accordingly
- Update internal penalty-exposure estimates and compliance training materials, since several fixed amounts businesses may have budgeted against have changed materially
- Treat this as VAT/Excise-specific — don't assume the same percentages apply to a Corporate Tax filing or disclosure
How Corcess Helps
We track which penalty regime applies to each client's specific facts — including the violation date, tax type, and whether a disclosure is being made before or after any FTA contact — so voluntary disclosures and penalty exposure are calculated correctly under whichever framework actually governs the period in question.