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TAX Radical Changes in UAE Tax Administrative Penalties
The Cabinet Decision No. 129 of 2025 (“the New Decision”) introduces a comprehensive and business-friendly overhaul of the UAE's administrative penalties for the Tax Laws. Effective 14 April 2026, the new decision brings significant changes to financial penalties for common tax violations and simplifies calculation methods for late payments and voluntary disclosures.
Below is a comparative summary of key penalties under the New Decision compared to the erstwhile Cabinet Decision No. 108 of 2021 (“the Old Decision”).
Comparative Analysis of Administrative Penalties
| Violation Description | Administrative Penalties (Old Decision) | Administrative Penalties (New Decision) |
|---|---|---|
| Failure to keep required records |
AED 10,000 (first time) AED 20,000 (repetition) |
AED 1,000 per violation AED 20,000 (if repeated within 24 months) |
| Failure to submit data in Arabic | AED 20,000 | AED 5,000 |
| Failure to update tax record information |
AED 5,000 (first time) AED 10,000 (repetition) |
AED 1,000 per violation AED 5,000 (if repeated within 24 months) |
| Legal representative failure to notify appointment | AED 10,000 | AED 1,000 |
| Late payment of payable tax |
2% immediately due, plus 4% monthly penalty (up to 300%) |
14% per annum calculated monthly on the unpaid amount |
| Submitting an incorrect tax return |
AED 1,000 (first time) / AED 2,000 (repetition) Minimum AED 500 if tax difference exists |
AED 500 if tax due exists Nil if corrected before deadline or via voluntary disclosure with no tax difference |
| Submitting a voluntary disclosure | 5% – 40% depending on years elapsed | 1% monthly penalty on tax difference |
| Failure to submit voluntary disclosure before tax audit |
50% of error amount + 4% monthly penalty |
15% fixed penalty + 1% monthly penalty |
| Failure to calculate tax on behalf of another |
2% immediately due + 4% monthly penalty (up to 300%) |
14% per annum calculated monthly |
Conclusion
The New Decision reflects a significant shift towards a simplified, fair, and business-friendly tax compliance framework in the UAE. Reduced penalties and streamlined calculations aim to encourage voluntary compliance while reducing the financial burden on taxpayers.
Our team at FAAB Partners would be happy to discuss this development further. Please feel free to reach out for any assistance required.
Regards,
FAAB PARTNERS