Cabinet Decision amends the administrative penalties for violation of UAE tax laws

Background

On 9 October 2025, the UAE Ministry of Finance (MOF) issued Cabinet Decision No. 129 of 2025, which amends the previous Cabinet Decision No. 108 of 2021. The Decision was officially published on 11 November 2025 and will take effect on 14 April 2026.

The new decision introduces significant changes to administrative penalties for tax law violations in the UAE. It revises penalties violations of the Tax Procedures Law¹, VAT Law² and Excise Tax Law³, with the goal of simplifying compliance, improving transparency, and harmonizing penalties across various types of taxes in the UAE.

The decision now references Federal Decree-Law No. 28 of 2022 on Tax Procedures, replacing all mentions of the former Federal Law No. 7 of 2017 on Tax Procedures. This update aligns the administrative penalty framework with the current procedural and enforcement rules and terminology applied by the Federal Tax Authority (FTA).

 

Key changes compared to the previous penalty framework

Violation	Change of the administrative penalty (AED)
Failure to submit tax-related data, records, and documents in Arabic when requested by the FTA	5,000 (before: 20,000)
Failure to inform the FTA of changes to tax records and information kept by the FTA	1,000 for each violation and 5,000 in each case of repeated violation within 24 months from the last violation (before: 5,000 for the first time and 10,000 in case of repetition)
Failure of the Legal Representative to inform the FTA of its appointment	1,000 (before: 10,000)
Failure to settle the tax payable stated in the Tax Return, Voluntary Disclosure, or the Tax Assessment	Flat annualized rate of 14%, calculated on a monthly basis (cca. 1.17% per month). Before: compounding penalties (fixed penalty of 2% of unpaid due applied a day after due date and 4% monthly penalty applied after a month, capped at 300%)
Incorrect Tax Return	500, unless corrected before due date or via VD (before: 1,000 or 2,000 in case of repetition)
Submission of Voluntary Disclosure ("VD")	1% per month on tax difference (before: tiered penalties (5%–40%))
Failure to submit a VD before being notified of a Tax Audit	Fixed penalty of 15% + 1% monthly on tax difference (time-based until disclosure or assessment). Before: fixed penalty of 50% on the amount of error and 4% monthly on unpaid tax or ineligible refund

 

Conclusion

With the issuance of Cabinet Decision No. 129 on administrative penalties for violations of UAE tax laws, the MOF aimed not only to make penalties less burdensome but also to simplify calculations and create a more business-friendly compliance framework.

Certain penalties remain unchanged, such as those related to timely tax registration and deregistration. This indicates that the FTA will maintain strict compliance discipline regarding the EmaraTax portal, which serves as the primary source of information and the main channel of communication.

On the other hand, other areas undergo significant reform. Notably, penalties for VDs have been substantially reduced and structured to incentivize taxpayers. This approach promotes proactive compliance, even if retroactively, by enabling taxpayers to voluntarily correct errors. In turn, it might help easing the FTA’s burden of conducting extensive audits.

Previously, penalties differed across VAT and Excise Tax regimes compared to Corporate Tax for violations related to unpaid tax, amendments to tax records, VDs, or notifications about legal representative appointments. Under the new decision, these penalties are now harmonized with those outlined in Cabinet Decision No. 75 of 2023, which governs administrative penalties Corporate Tax ⁴.

This broader alignment of penalties across VAT, Excise Tax, and Corporate Tax provides taxpayers with greater clarity and overview regarding compliance obligations. By streamlining the framework, the UAE reinforces its commitment to a transparent, efficient, and globally competitive tax environment.

 

Key takeaway

Cabinet Decision No. 129 introduces key changes to administrative penalties. By reducing penalties and harmonizing rules across VAT, Excise Tax, and Corporate Tax, the decision creates a more transparent and business-friendly framework.

This harmonization across UAE taxes enhances consistency and provides taxpayers with greater clarity and a better understanding of compliance obligations.

The significant reduction in penalties, particularly those related to voluntary disclosures, promotes proactive compliance, builds trust between taxpayers and the Federal Tax Authority.

 

Reference

Cabinet Decision No. 40 of 2017 and its amendments

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¹ Federal Decree-Law No. 28 of 2022 on Tax Procedures and its amendments
² Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments
³ Federal Decree-Law No. 7 of 2017 on Excise Tax and its amendments
⁴ Federal Decree-Law No. (47) of 2022 on Corporate Tax