Updated 26 August 2026 | UAE Tax | MGA Auditing

Introduction

UAE businesses dealing with VAT, Excise Tax, tax registrations, voluntary disclosures or FTA audits should understand the penalty changes that became effective in 2026. Cabinet Decision No. 129 of 2025 amended Cabinet Decision No. 40 of 2017 on administrative penalties for violations of UAE tax laws and took effect on 14 April 2026.

The amendments reduce or revise several administrative penalties and change how certain penalties are calculated. The Federal Tax Authority (FTA) has encouraged registrants to correct tax records promptly and submit voluntary disclosures where required.

There is one important point that businesses should not miss: Corporate Tax penalties are governed by a separate penalty schedule under Cabinet Decision No. 75 of 2023, as amended by Cabinet Decision No. 10 of 2024. Businesses should therefore avoid mixing the VAT/Excise penalty rules in Cabinet Decision No. 40 with the separate Corporate Tax rules.

What Did Cabinet Decision No. 129 of 2025 Change?

Cabinet Decision No. 129 of 2025 amended the administrative penalty framework in Cabinet Decision No. 40 of 2017. Under that framework, the “Tax Law” for purposes of the decision refers to the Excise Tax Law and the VAT Law, while Table No. 1 also addresses Tax Procedures Law violations.

The FTA announced that the amendments are intended to support voluntary compliance, reduce certain penalties and encourage businesses to correct records and tax positions without unnecessary delay.

Key Penalties Under the Updated Decision 40 Framework

The following are some of the most relevant penalty amounts under Cabinet Decision No. 40 of 2017 as amended, effective from 14 April 2026:

• Failure to keep the required tax records and information: AED 10,000 for each violation; AED 20,000 for a repeated violation within 24 months.
• Failure to submit tax-related data, records or documents in Arabic when requested by the FTA: AED 5,000.
• Failure to submit a tax registration application within the required timeframe under the applicable Tax Law: AED 10,000.
• Late deregistration application: AED 1,000, then AED 1,000 monthly on the same date, up to a maximum of AED 10,000.
• Failure to notify the FTA of a matter requiring amendment of the tax record: AED 1,000 per violation; AED 5,000 for a repeated violation within 24 months.
• Failure of a legal representative to notify the FTA of the appointment within the required timeframe: AED 1,000, payable from the legal representative’s own funds.
• Late Tax Return under the Decision 40 framework: AED 1,000 for the first violation and AED 2,000 for repetition within 24 months.

Late Payment: How the 14% Penalty Works

For failure to settle Payable Tax within the required timeframe under Decision 40, the amended schedule applies a monthly penalty at an annual rate of 14% on the unsettled Payable Tax amount for each month or part thereof. It runs from the day following the payment due date and is imposed on the same date monthly thereafter.

This should not be described as “14% compounded monthly” or “calculated daily”. The wording in the official decision is a monthly penalty at a 14% per annum rate for each month or part thereof.

Incorrect Tax Returns and Voluntary Disclosures

The updated framework also changes the financial consequences of correcting errors:

• An incorrect Tax Return can attract a fixed AED 500 penalty, unless the registrant corrects the return within the filing deadline or submits a Voluntary Disclosure to correct the return without creating a Due Tax difference.
• Where a Voluntary Disclosure is submitted for an error that creates a Tax Difference, the penalty is 1% of the Tax Difference for each month or part thereof, calculated from the day after the relevant return due date or refund application until the Voluntary Disclosure is submitted.
• If the business does not submit the required Voluntary Disclosure before being notified of an FTA Tax Audit, the schedule provides for a fixed penalty of 15% of the Tax Difference plus a 1% monthly penalty for each month or part thereof, calculated under the rules in the decision.

The practical message is straightforward: once a material tax error is identified, delaying the review can increase the financial exposure. The correct treatment still depends on the facts of the case, the size and nature of the error, and the applicable tax period.

Important: Corporate Tax Penalties Follow a Separate Decision

Cabinet Decision No. 129 of 2025 should not be used as the penalty table for Corporate Tax violations. Corporate Tax administrative penalties are set out separately in Cabinet Decision No. 75 of 2023 on violations related to Federal Decree-Law No. 47 of 2022, as amended by Cabinet Decision No. 10 of 2024.

Key Corporate Tax penalty amounts include:

• Late Corporate Tax registration: AED 10,000.
• Late Corporate Tax Return filing: AED 500 for each month or part thereof for the first 12 months, then AED 1,000 for each month or part thereof from the 13th month onwards.
• Late settlement of Corporate Tax Payable: a monthly penalty at an annual rate of 14% on the unsettled amount for each month or part thereof.
• Failure to keep required Corporate Tax records: AED 10,000 per violation; AED 20,000 for a repeated violation within 24 months.
• Voluntary Disclosure involving a Tax Difference: 1% of the Tax Difference for each month or part thereof under the Corporate Tax penalty schedule.
• Failure to submit the required Voluntary Disclosure before FTA Tax Audit notification: 15% of the Tax Difference plus the applicable 1% monthly penalty.

Corporate Tax Late Registration Penalty Waiver — Separate Initiative

The AED 10,000 Corporate Tax late registration penalty has a separate FTA waiver initiative. This waiver is not created by Cabinet Decision No. 129 of 2025.

Under the FTA initiative, a taxable person may qualify for waiver of the late registration penalty if the first Corporate Tax Return is submitted within seven months from the end of the first Tax Period. An Exempt Person required to register may qualify if the first annual declaration is submitted within seven months from the end of the first Financial Year, subject to the initiative conditions.

Where the penalty has already been paid and the waiver conditions are met, the FTA guidance states that the AED 10,000 amount may be credited back to the person’s EmaraTax Corporate Tax account. Eligibility must be checked case by case.

2026 Corporate Tax Filing Reminder

For a practical filing checklist, see our UAE Corporate Tax Filing Deadline 2026 guide

Corporate Tax Returns and Corporate Tax Payable are generally due within nine months from the end of the relevant Tax Period. The FTA has specifically stated that a taxable person whose financial year ended on 31 December 2025 must file the Corporate Tax Return and pay the Corporate Tax due on or before 30 September 2026.

This makes the current period particularly important for UAE businesses with a calendar-year financial year. Preparing the return early gives management time to reconcile accounting records, VAT returns, related-party balances, owner transactions, deductible expenses and supporting schedules before submission through EmaraTax.

What UAE Businesses Should Do Now

1. Confirm which penalty framework applies to the issue: Decision 40 for the relevant Tax Procedures/VAT/Excise violations, or Decision 75 for Corporate Tax violations.
2. Review the EmaraTax account for outstanding registrations, return filing obligations, tax payments, tax record updates and FTA correspondence.
3. Reconcile VAT and Corporate Tax submissions to accounting records, invoices, bank statements and supporting documents.
4. Where an error is identified, determine whether a Voluntary Disclosure is required before taking action.
5. For Corporate Tax, check the exact Tax Period end date and the nine-month filing/payment deadline.
6. If a Corporate Tax late registration penalty exists, check whether the seven-month waiver initiative can still apply to the first Tax Period or first Financial Year.

How an FTA Registered Tax Agent Can Help

Businesses can deal directly with the FTA, but an appointed FTA Registered Tax Agent can assist with tax compliance reviews, EmaraTax submissions, voluntary disclosure preparation, FTA correspondence and penalty-related matters within the scope permitted by UAE tax legislation.

MGA Auditing FZE LLC supports UAE businesses with accounting records review, Corporate Tax filing preparation, VAT review, financial reporting and compliance-focused advisory. Tax agent-related services are provided through MGA Accounting and Bookkeeping EST – Dubai Branch, connected with an FTA Registered Tax Agent under TAAN 2002438.

Related guide: Corporate Tax Return Filing UAE

Tax Agent support: FTA Registered Tax Agent UAE

Frequently Asked Questions

When did Cabinet Decision No. 129 of 2025 take effect?

It took effect on 14 April 2026. The FTA announced the entry into force of the amended penalty framework on 15 April 2026.

Does Cabinet Decision No. 129 of 2025 set Corporate Tax late filing penalties?

No. Corporate Tax penalty amounts are governed separately by Cabinet Decision No. 75 of 2023 and its amendments. Late Corporate Tax Return filing is AED 500 per month or part thereof for the first 12 months, then AED 1,000 per month or part thereof from the 13th month onwards.

Can a Corporate Tax late registration penalty of AED 10,000 be waived?

Potentially, yes. The FTA has a separate waiver initiative subject to conditions. The key timing condition is generally submission of the first Tax Return within seven months from the end of the first Tax Period, or the first annual declaration within seven months from the end of the first Financial Year for an Exempt Person required to register.

Is voluntary disclosure always better than waiting for an FTA audit?

Where a Voluntary Disclosure is legally required, the penalty schedule is materially different before and after FTA audit notification. The correct action should be based on a review of the error, the Tax Difference, the relevant periods and the supporting records.

What is the Corporate Tax filing deadline for a company with a 31 December 2025 year-end?

The FTA has stated that such a taxable person must file the Corporate Tax Return and pay the Corporate Tax due on or before 30 September 2026, subject to the applicable Tax Period and any specific FTA decision affecting the person.

Contact MGA Auditing

If your business has outstanding tax filings, a Corporate Tax registration penalty, a possible Voluntary Disclosure, an FTA enquiry or a 2026 Corporate Tax filing deadline, contact MGA Auditing for a practical review before submission.

• Phone / WhatsApp: +971 56 271 5045
• Email: md@mgaaudits.com
• Office: Office 36, Unit 14, 1st Floor, Princess Car Building, Sheikh Zayed Road, Dubai, UAE
• FTA Registered Tax Agent: TAAN 2002438 (tax agent-related services through MGA Accounting and Bookkeeping EST – Dubai Branch)

Official Sources

FTA — Entry into force of Cabinet Decision No. 129 of 2025 (15 April 2026)

Cabinet Decision No. 40 of 2017 and amendments (including Decision 129 of 2025)

Cabinet Decision No. 75 of 2023 and amendments — Corporate Tax penalties

FTA — Corporate Tax late registration penalty waiver initiative

FTA — Corporate Tax returns and payment within nine months

Disclaimer

This article is for general information only and does not constitute legal, tax or accounting advice. UAE tax legislation, FTA decisions, public clarifications and administrative practices may change. Penalty treatment depends on the exact facts, tax type, tax period, filing history and timing of corrective action. Businesses should review the latest official FTA guidance before making a filing or penalty-related decision.