On 14 April 2026, Cabinet Decision No. 129 of 2025 changed the administrative penalties for VAT and excise tax. Late payment is now charged at 14% a year on the unpaid tax, applied monthly, and several fixed penalties changed.
Most VAT penalties are not caused by complex law. They come from late returns and payments, wrong tax codes and missing records, which a monthly routine can catch.
Which penalties apply most often?
| Violation | Penalty from 14 April 2026 |
|---|---|
| Late registration | AED 10,000 |
| Late VAT return | AED 1,000; AED 2,000 if repeated within 24 months |
| Late payment | 14% a year on the unpaid tax, charged monthly from the day after the due date |
| Error corrected by voluntary disclosure | 1% of the tax difference for each month or part of a month until the disclosure is made |
| Voluntary disclosure after an audit notice | A fixed 15% of the tax difference, plus the monthly 1% |
| Failure to keep records | AED 10,000; AED 20,000 if repeated within 24 months |
Source: Cabinet Decision No. 40 of 2017 on administrative penalties, as amended by Cabinet Decision No. 129 of 2025, Table 1 (Ministry of Finance consolidated text, checked 22 October 2026; the English version is an unofficial translation).
Why do the penalties happen?
- Returns prepared from a trial balance that was not reconciled to the VAT accounts.
- Tax codes set up once in the ERP and never reviewed after new products, customers or entities were added.
- Zero-rated exports without the customs or shipping evidence the law requires.
- Blocked input tax, such as entertainment, recovered in full.
- Errors found after filing and left in the next return instead of corrected through a voluntary disclosure.
Which controls prevent them?
- A VAT calendar with return and payment dates for every entity, owned by one person.
- A monthly reconciliation of output and input VAT in the ledger to the draft return.
- A tax code review whenever a new product, customer type, entity or system goes live.
- An evidence file for every zero-rated sale, completed before the return is filed.
- A review of blocked input tax before each return.
- A rule for errors: assess every error found after filing and decide on a voluntary disclosure within a set time.
How much does a late payment cost?
Hypothetical example: a business pays AED 200,000 of VAT three months late. At 14% a year, charged monthly, the penalty is about AED 7,000 (AED 200,000 × 14% × 3/12). The tax itself is still due.
What should we do if we find an error?
Assess it quickly. The monthly 1% on the tax difference runs until the voluntary disclosure is made, and disclosing before the FTA notifies an audit avoids the additional fixed 15%.