VAT penalties in the UAE run from AED 1,000 for a late deregistration application to 300% of the unpaid tax for late payment that drags on. The violations most UAE businesses actually commit — late filing, late payment, an incorrect return — carry penalties in hundreds or thousands of dirhams, not percentages of revenue. This page lists every major VAT violation with its current administrative penalty, names the Cabinet Decision each figure comes from, and flags what changed on 14 April 2026 under Cabinet Decision No. 129 of 2025.
TL;DR
- Late payment: 2% within 7 days, 4% days 8-31, then 1% monthly — capped at 300% of unpaid tax.
- Late VAT registration costs AED 10,000; late deregistration AED 1,000 monthly, max AED 10,000.
- Incorrect return: AED 1,000 first time, AED 2,000 on repetition — plus percentage penalties if tax was underpaid.
- From 14 April 2026, Arabic-records and record-update penalties dropped sharply (Cabinet Decision 129 of 2025).
- Voluntary disclosure before an FTA audit limits percentage penalties to 5-40% depending on the delay.
Why this matters
A VAT penalty is rarely just one penalty. A late return usually triggers the late-filing fine and, if tax was owed, the late-payment percentages on top. The figures below are the FTA's current administrative penalties for VAT violations — the same amounts the Federal Tax Authority applies on EmaraTax. Bookmark the table; check your exposure against it before any due date slips.
If your returns are already behind, VAT return filing support can regularise the position and file any outstanding periods before the penalty chain compounds.
The current VAT penalty table (2026)
All amounts are in AED and reflect the amended Cabinet Decision No. 40 of 2017 as it stands in 2026.
| Violation | Administrative penalty | Source |
|---|---|---|
| Failure to pay VAT by the due date | 2% of unpaid tax (within 7 days of due date); 4% (days 8-31); 1% of unpaid tax for each month or part thereafter — capped at 300% of the unpaid tax | Cabinet Decision 40/2017, Table 2, as amended by CD 49/2021 — FTA published text |
| Failure to submit a VAT registration application on time | AED 10,000 | CD 40/2017, Table 2, item 3 — FTA published text |
| Failure to submit a VAT deregistration application on time | AED 1,000 per month (or part), capped at AED 10,000 | CD 40/2017, Table 2, item 4 |
| Failure to keep required records and information | AED 10,000 first time; AED 20,000 on repetition | CD 40/2017, Table 2, item 1 |
| Failure to submit requested records and documents in Arabic | AED 5,000 (reduced from AED 20,000, effective 14 April 2026) | CD 129/2025 amending CD 40/2017 — FTA announcement, 15 April 2026 |
| Failure to notify the FTA of a change requiring amendment of the tax record | AED 1,000 per violation; AED 5,000 on repetition within 24 months (previously AED 5,000 / AED 10,000) | CD 129/2025 amending CD 40/2017 |
| Submission of an incorrect VAT return (no tax understated) | AED 1,000 first time; AED 2,000 on repetition | CD 49/2021 amendments to CD 40/2017, Table 2, item 10 |
| Voluntary disclosure of an understatement on a submitted return | 5% of the tax difference if within 1 year of the due date; 10% in year 2; 20% in year 3; 30% in year 4; 40% thereafter | CD 49/2021, percentage penalty schedule |
| Failure to display prices inclusive of tax | AED 5,000 | CD 40/2017, Table 3 (VAT violations), item 1 |
One relief layer sits above the table: where a total administrative penalty is AED 50,000 or less, Federal Decree-Law No. 28 of 2022 on Tax Procedures (Article 26, as amended) reduces it by 30% when the penalty is settled in full within 30 days of notification.
Late payment of VAT: the 2% / 4% / 1% ladder
Late payment is the penalty that scales worst. If VAT due on a return is not paid within seven days of the due date, 2% of the unpaid amount applies immediately. Between day 8 and day 31 the penalty rises to 4% of the unpaid tax. From day 32 onward, 1% of the unpaid amount is charged for each month or part of a month — with a hard cap at 300% of the original unpaid tax (Cabinet Decision 40/2017 Table 2, item 9, as amended by CD 49/2021).
A business that under-collects and cannot pay should still file the return on time. Filing without paying triggers the payment ladder; not filing triggers it plus late-filing treatment and a weaker position for any subsequent voluntary disclosure.
Late filing, late registration, late deregistration
Late registration carries a flat AED 10,000 (Table 2, item 3). This applies when a business crosses the mandatory threshold — taxable supplies and imports above AED 375,000 in 12 months — and files after the 28-day registration window. The threshold mechanics themselves are covered in VAT registration thresholds by business type in the UAE.
Late deregistration is charged at AED 1,000 per month or part, capped at AED 10,000 (item 4). A business that ceases taxable activity must apply within 20 business days of the date it stops — the clock runs monthly regardless of whether the old return cycle did.
Incorrect returns and voluntary disclosures
The fixed penalty for an incorrect return is small: AED 1,000 the first time, AED 2,000 on repetition (Table 2, item 10). The expensive part is the percentage penalty on the tax difference when an error understates the tax due.
A voluntary disclosure filed before the FTA starts an audit limits the exposure: 5% of the difference if filed within one year of the return's due date, rising to 10%, 20%, 30% and 40% in each later year (CD 49/2021). Disclosing before being notified is what preserves the lower band — once an audit notification issues, that path closes. The same percentage ladder also applies to errors in refund applications and assessments.
Fixed-amount violations most businesses miss
Three fixed penalties surface repeatedly in FTA enforcement that have nothing to do with filing:
- AED 5,000 for failing to display prices inclusive of VAT (Table 3, item 1) — relevant to retail, e-commerce and hospitality.
- AED 5,000 (since 14 April 2026) for failing to provide requested records in Arabic — previously AED 20,000 (CD 129/2025).
- AED 1,000 per violation, AED 5,000 on repetition within 24 months, for failing to tell the FTA about a change to the tax record — a new business address, a change of authorised signatory, a changed legal form.
The record-update penalty dropped from AED 5,000/10,000 to AED 1,000/5,000 under CD 129/2025, and the Arabic-records penalty dropped from AED 20,000 to AED 5,000. Both took effect 14 April 2026.
How to avoid VAT penalties in the UAE
- File on time even when you cannot pay. Filing on time avoids the late-filing treatment; the payment ladder alone is cheaper than both.
- Set a filing calendar around your tax period. Quarterly filers whose period ends 31 December must file by 28 January; the FTA publishes final deadlines on its site.
- Reconcile output and input tax monthly. The AED 1,000 incorrect-return fine is trivial; the 5-40% disclosure ladder on a real understatement is not.
- Update your tax record within 20 business days of any change — the CD 129/2025 penalty is now AED 1,000, but each violation counts.
- Disclose before you are notified. A voluntary disclosure inside year one caps the percentage penalty at 5% of the difference.
Where the history is messy, VAT registration and advisory includes cleaning up prior periods before they turn into assessment-based penalties.
FAQ
What is the penalty for late VAT payment in the UAE?
2% of the unpaid tax if paid within 7 days of the due date, 4% between days 8 and 31, then 1% per month or part of a month — capped at 300% of the unpaid tax. The schedule comes from Cabinet Decision 40/2017 as amended by Cabinet Decision 49/2021.
What is the fine for late VAT registration in the UAE in 2026?
AED 10,000. It applies when a business files its VAT registration application after the deadline that follows crossing the mandatory AED 375,000 threshold.
What is the penalty for filing an incorrect VAT return?
AED 1,000 for the first incorrect return and AED 2,000 on repetition. If the error understated the tax due, a percentage penalty of 5% to 40% of the difference applies, depending on when it is disclosed.
How can I reduce VAT penalties in the UAE?
File on time, disclose errors through a voluntary disclosure before an FTA audit notification, and settle any penalty of AED 50,000 or less within 30 days — Article 26 of the Tax Procedures Law as amended cuts that penalty by 30%.
Did UAE tax penalties change in 2026?
Yes. Cabinet Decision 129 of 2025 took effect on 14 April 2026: the Arabic-records penalty fell from AED 20,000 to AED 5,000 and the record-update penalty from AED 5,000/10,000 to AED 1,000/5,000, among other reductions.
