UAE Reduces Tax Penalties

Cabinet Decision No. (129) of 2025 officially came into force, amending several provisions of Cabinet Decision No. (40) of 2017 on administrative penalties for tax law violations in the UAE. The update, confirmed by the FTA (Federal Tax Authority), reduces several fines, restructures how certain penalties are calculated, and creates stronger incentives for businesses to voluntarily and promptly correct errors in their tax records.

For companies registered for VAT (Value Added Tax) or Excise Tax, the revised framework makes compliance less costly and gives more room to address past mistakes before they escalate.

What Has Changed

The amendments cover penalties related to the Federal Decree-Law on Tax Procedures, the Federal Decree-Law on Excise Tax, and the Federal Decree-Law on Value Added Tax. Across these areas, fines have either been reduced outright or had their calculation method adjusted.

Here are some of the most relevant changes.

The penalty for failing to submit data, records, and tax-related documents in Arabic when requested by the FTA has dropped from AED 20,000 to AED 5,000. For businesses that operate primarily in English or another language, this is a considerable reduction that eases the pressure around document translation.

The penalty for a registrant’s failure to notify the FTA of any case that may require an amendment to its tax record has been restructured. Under the previous rules, the fine was AED 5,000 for the first instance and AED 10,000 for any repetition. The new framework sets it at AED 1,000 per violation, increasing to AED 5,000 only if the same violation is repeated within 24 months of the last one.

For legal representatives of taxable persons, failure to notify the FTA of an appointment within the prescribed time limit now carries a fine of AED 1,000, down from AED 10,000. This penalty must be paid from the legal representative’s own funds, not from the company’s accounts.

Other Violations Covered

Beyond these examples, the FTA has also revised penalties for several other common violations, including late payment of tax by a taxable person within the deadlines set out in the law, submission of an incorrect tax return, submission of a voluntary disclosure regarding errors in a tax return, tax assessment, or tax refund application, and failure to submit such a voluntary disclosure before the FTA notifies the taxpayer of an audit.

The amendments also address the obligation of a registrant to account for tax on behalf of another person when required to do so under UAE tax law.

In each of these categories, the revised structure favours early and honest action. Businesses that come forward to correct errors on their own initiative will face considerably lower penalties than those whose mistakes are uncovered during an FTA audit.

What You Should Do Now

If your company is registered for VAT or Excise Tax, the current moment is a practical opportunity to review your position. With reduced penalties now in effect, the cost of correcting past issues is lower than it has been in years.

There are a few areas worth checking. Start with whether any information in your FTA records needs updating. Changes in trade licence details, authorised signatories, business activities, or contact information should be reported. The new penalty structure makes late notification far less expensive, but acting sooner is always better than waiting for the FTA to discover a gap.

Next, review past tax returns for any errors. If a voluntary disclosure is warranted, submitting it before the FTA initiates an audit remains the most favourable route. The revised rules reinforce this principle by keeping the financial consequences proportionate for those who act proactively.

Finally, make sure your document management is in order. Being able to provide tax-related records in Arabic when requested will save both time and money if the FTA asks for documentation.