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The UAE Ministry of Finance (MoF) has published the Cabinet Decision No. 129 of 2025 on October 9, 2025, and it would be effective from April 14, 2026.
This decision introduces significant changes aimed at harmonizing penalties for VAT and Excise Tax with those applicable under UAE Corporate Tax law, as previously outlined in Cabinet Decision No. 75 of 2023. The alignment is intended to ensure consistency across the UAE tax framework.
For your convenience, we have prepared a comparative analysis focusing on the key changes between:
- Cabinet Decision No. 108 of 2021 (Issued on Dec 30, 2021 and Effective from Jan 1,2022)
- Cabinet Decision No. 129 of 2025 (Issued on Oct 9, 2025 and Effective from Apr 14, 2026)
Our analysis highlights only the amendments introduced under the latest decision.
|
Sr. No. |
Violation |
Cabinet Decision 108 of 2021 (Effective until April 13, 2026) |
Cabinet Decision 129 of 2025 (Effective from April 14, 2026 onwards) |
Comments |
|
|
1 |
Failure to keep required records and information |
AED 10,000 first time; AED 20,000 in case of repetition |
AED 10,000 per violation; AED 20,000 if repeated within 24 months. |
Fine for repeat violation would be applicable if offence made within a 24-months of last violation. |
|
|
2 |
Failure to submit tax data/records in Arabic |
AED 20,000 |
AED 5,000 |
There is a significant reduction in penalty. |
|
|
5 |
Failure to inform FTA of changes to tax record |
AED 5,000 first time; AED 10,000 repeat |
AED 1,000 per violation; AED 5,000 if repeated within 24 months |
There is a significant reduction for a first-time offence, and a fine for repeating a violation would be applicable if the offence is made within a 24-month window. |
|
|
6 |
Legal Representative failed to notify appointment |
AED 10,000 |
AED 1,000 |
There is a significant reduction in penalty. |
|
|
9 |
Late payment of payable tax |
2% day after due date + 4% monthly (max 300%) |
14% per annum penalty (applied monthly on unpaid tax after the due date). |
This is a significant relief. Late Payment Penalty reduced from 2% (first month) + 4% monthly thereafter to effectively 1.17% per month. |
|
|
10 |
Incorrect tax return |
AED 1,000 first; AED 2,000 repeat; exceptions apply. |
AED 500 penalty applies. However, no penalty will apply if: - the tax return is corrected before the due date or; - there is no difference in the amount of tax due after submitting VD |
The penalty has been reduced, and the provision has been simplified. Further, no VD penalty will be applicable where there is no change in the amount of due tax. |
|
|
11 |
Voluntary Disclosure (VD) submitted |
Penalty ranging from 5% to 40% of tax difference based on years of delay. |
A monthly penalty of 1% on the tax difference, for each month or part thereof. |
Effectively and for most cases, these penalties have increased. (See example 1 below) |
|
|
12 |
Failure to submit VD before audit notice |
Fixed penalty of 50% + 4% monthly |
Fixed penalty of 15% + 1% monthly |
Significant reduction in fixed and variable penalty. (See example 2 below) |
|
|
14 |
Failure to calculate tax on behalf of another person |
2% day after due date + 4% monthly (max 300%) |
14% per annum penalty (applied monthly on unpaid tax after the due date). |
This is a significant relief. Late Payment Penalty reduced from 2% (first month) + 4% monthly thereafter to effectively 1.17% per month. |
|
Example 1 - Voluntary Disclosure variable penalties
|
VD filing window (from original due date) |
Outgoing provisions |
New Penalties (Applicable from 14 April 2026) |
|
Within 1 year |
5% |
1% to 12%* |
|
1 to 2 years |
10% |
13% to 24%* |
|
2 to 3 years |
20% |
25% to 36%* |
|
3 to 4 years |
30% |
37% to 48%* |
|
4 to 5 years |
40% |
49% to 60%* |
*Depending on when the error is corrected.
Example 2 – Failure to submit VD before an Audit notice (Comparison b/w old and new Sr. No. 12)
Tax Period: January 2024, Due on February 28, 2024
Tax Difference: AED 100,000 (Payable)
Audit Assessment Issued on July 1, 2026
No Voluntary Disclosure Filed
Penalties compared under CD 108/2021 and CD 129/2025
|
Cabinet decision |
Fixed Penalty |
Variable Penalty |
Total Penalty |
|
Outgoing (CD 108/2021) |
AED 50,000 (50% of 100,000) |
AED 116,000 (4% × 29 months of 100,000) |
AED 166,000/- |
|
New Penalty Law (CD 129/2025) |
AED 15,000 (15% of 100,000) |
AED 29,000 (1% × 29 months of 100,000) |
AED 44,000/- |
Example 3 - Audit vs Voluntary Disclosure penalties as per new Cabinet Decision 129 of 2025 (Comparison b/w new Sr. No. 11 and 12)
Tax Period: January 2024. Due on February 28, 2024
Audit Assessment/ VD Filed: July 1, 2026
Duration: 29 months
Tax Difference: AED 100,000 (Payable)
|
Scenario |
Fixed Penalty |
Variable Penalty |
Total Penalty |
|
VD |
Not applicable |
AED 29,000 (1% × 29 months of 100,000) |
AED 29,000 |
|
Audit (No VD Filed) |
AED 15,000 (15% of 100,000) |
AED 29,000 (1% × 29 months of 100,000) |
AED 44,000 |
Filing a VD before audit avoids the 15% fixed penalty, reducing exposure by AED 15,000 for tax liability of AED 100,000.
A&M Comment
The overall reduction in penalties is a welcome development. The gap between penalties imposed by the FTA during an audit and voluntary disclosure penalties is actually generous. However, it should still continue to incentivise taxpayers to voluntarily comply with the Tax laws by maintaining lower penalties rates.
Also, this shift could influence how businesses in the UAE approach their tax risk management—prompting a more confident, forward-looking approach while still respecting the boundaries of compliance.
Originally published 19 November 2025
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
