If you understated tax on a UAE return, correcting it before the Federal Tax Authority notifies you of an audit costs 1% of the tax difference per month. Waiting until the Authority finds it adds a fixed 15% of the tax difference on top of that monthly charge. The gap between those two numbers is the entire economics of voluntary disclosure, and both figures come from the penalty schedule as amended by Cabinet Decision No. 129 of 2025, in force since 14 April 2026.
That decision rewrote the VAT and excise penalty tables and aligned them with the corporate tax approach. Most guidance still circulating describes the old escalating structure. This guide covers the current penalty schedule, when a voluntary disclosure is mandatory and when it is the wrong tool, the AED 10,000 threshold that decides which route to use, and the full dispute ladder if you think the Authority has it wrong.
What Changed on 14 April 2026
Cabinet Decision No. 129 of 2025 was issued on 9 October 2025 and took effect on 14 April 2026, amending Cabinet Decision No. 40 of 2017. It replaced the previous late-payment mechanics with a flat 14% per annum charged monthly, and restructured the voluntary disclosure penalties into a 1% monthly charge with a separate 15% fixed penalty for failing to disclose before an audit.
Two practical consequences follow. First, long-running arrears are now materially cheaper than they were, because the old structure combined an upfront percentage with a compounding monthly charge that could reach a very large multiple of the original tax. Second, the tiered voluntary disclosure penalty that varied with how old the error was has gone, replaced by a straight time-based 1% per month. The longer you sit on a known error, the more it costs, on a smooth curve rather than in steps.
The decision also updated the framework’s references from the repealed Federal Law No. 7 of 2017 to Federal Decree-Law No. 28 of 2022 on Tax Procedures, which is the governing procedural law and was itself amended by Federal Decree-Law No. 17 of 2025.
The Current Penalty Schedule
The penalties below are the Tax Procedures table that applies across VAT and excise. Corporate tax penalties sit in a separate schedule, Cabinet Decision No. 75 of 2023, though the methodology now mirrors this one.
| Violation | Administrative penalty |
|---|---|
| Failure to keep required records | AED 10,000; AED 20,000 on repetition within 24 months |
| Failure to submit records in Arabic when requested | AED 5,000 |
| Late tax registration | AED 10,000 |
| Late deregistration | AED 1,000 on the late date and monthly thereafter, capped at AED 10,000 |
| Failure to notify the Authority of a change to your tax record | AED 1,000; AED 5,000 on repetition within 24 months |
| Late submission of a tax return | AED 1,000 first time; AED 2,000 on repetition within 24 months |
| Late settlement of payable tax | 14% per annum, charged monthly for each month or part of a month, from the day after the due date |
| Submitting an incorrect tax return | AED 500, unless corrected before the return deadline or by a voluntary disclosure with no tax difference |
| Voluntary disclosure of an error | 1% per month on the tax difference, for each month or part of a month |
| Failure to disclose before being notified of a tax audit | 15% fixed on the tax difference, plus 1% per month |
| Failure to facilitate the work of a tax auditor | AED 20,000, payable from the person’s, legal representative’s or tax agent’s own funds |
| Failure to calculate tax due on import of goods | 50% of the unpaid or undeclared tax |
Note the two entries where the penalty is expressly payable from an individual’s own funds. Where a legal representative fails to notify their appointment or to file a return, and where a person obstructs an auditor, the schedule attaches the liability personally rather than to the entity.
How the late payment clock actually runs on a disclosure
The 14% per annum late-payment penalty needs a due date, and for a voluntary disclosure or an assessment the schedule sets one specifically: 20 business days from the date of submission in the case of a voluntary disclosure, and 20 business days from the date of receipt in the case of a tax assessment. So filing a disclosure does not start a late-payment charge immediately. It gives you a 20-business-day window to pay the underlying tax before that charge begins.
When a Voluntary Disclosure Is Mandatory, and When It Is Not
Article 10 of the Tax Procedures Law makes a voluntary disclosure compulsory where an error meant you paid too little, and optional where it meant you paid too much. The direction of the error decides whether you “shall” or “may” disclose.
- You must disclose where a return or assessment was incorrect and payable tax was calculated as less than it should have been, or where a refund application overstated what you were entitled to.
- You may disclose where payable tax was calculated as more than it should have been, or a refund application understated your entitlement. These are in your favor, so the law leaves the choice to you.
- Where there is no difference in due tax but the return contains an error or omission, you correct it by voluntary disclosure only in the cases the Authority specifies, and otherwise through a tax return.
The AED 10,000 Threshold That Decides the Route
Article 10 of Cabinet Decision No. 74 of 2023 splits the correction route by size. Above AED 10,000, you submit a voluntary disclosure within 20 business days of becoming aware of the error. At AED 10,000 or below, you correct it in a tax return instead.
For an error of AED 10,000 or less, the regulation directs you to correct it in a return that has not yet become due for a previous tax period, or in the return for the period in which you discovered the error, whichever is earlier. Only where there is no tax return through which the error can be corrected does a voluntary disclosure become the route, and then within the same 20 business days.
This is the detail most often reversed in practice. Filing a voluntary disclosure for a small error is not the safe, conservative choice; the regulation points you to the return. Businesses that file disclosures reflexively for every small adjustment create avoidable administrative history without reducing exposure.
The 20 business days run from the date you became aware of the error. Not from the end of the tax period, not from the date your accountant finished the review, and not from any contact by the Authority. Because awareness is the trigger and it is a question of fact, it is worth recording when and how an error was identified.
Tax Audits: What the Authority Can and Cannot Do
Under Article 16 of the Tax Procedures Law the Authority must notify you of a tax audit at least 10 business days before conducting it. That notice is also the deadline that matters for penalties, because a disclosure filed after it loses the benefit of the lower rate.
There are exceptions to the notice requirement. A tax auditor may enter without prior notification, for a period not exceeding 72 hours, where the Authority has serious grounds to believe the person is involved in tax evasion, where giving notice would hinder the audit, or where a person already notified tries to stop the auditor entering. In all those cases the auditor must obtain the required authorization.
Article 21 gives the person being audited specific rights: to ask the auditor to show their job identification card, to obtain a copy of the audit notification, to attend an audit taking place outside the Authority’s premises, and to obtain copies of the documents and data the Authority relies on. Article 18 confines audits to official working hours except where necessity requires otherwise, with authorization.
The five-year limit, and how it stretches
Article 46 bars the Authority from conducting an audit or issuing an assessment more than five years after the end of the relevant tax period. That limit has real exceptions. If you were notified that audit procedures had started before the five years expired, the Authority has a further four years from the date of that notification to complete it. If the audit relates to a voluntary disclosure submitted in the fifth year, it has one year from the date of that disclosure. A disclosure filed late in the window therefore reopens the period rather than closing it.
If You Disagree: The Full Dispute Ladder
UAE tax disputes follow a fixed sequence, and each stage is a precondition for the next. You cannot go to court without first objecting to the Tax Disputes Resolution Committee, and you cannot object to the Committee without first requesting reconsideration from the Authority.
| Stage | Your deadline | Their deadline |
|---|---|---|
| Tax assessment review request (Article 28) | 40 business days from notification of the assessment | FTA decides within 40 business days, notifies within 5 |
| Request for reconsideration (Article 29) | 40 business days from notification of the decision | FTA decides within 40 business days, notifies within 5 |
| Objection to the Tax Disputes Resolution Committee (Article 32) | 40 business days from notification of the reconsideration decision | Committee decides within 20 business days, notifies within 5 |
| Appeal to the competent court (Article 36) | 40 business days from notification of the objection outcome | Court timetable |
Three rules inside that ladder decide most cases before the merits are reached.
You must pay the tax before you can object. Article 32(2)(b) makes an objection inadmissible if the tax connected with it has not been paid in full. Read the wording carefully: it is the tax that must be settled, not the administrative penalties. That distinction is what makes an objection affordable in many penalty-heavy disputes.
An objection is inadmissible without a prior reconsideration request under Article 32(2)(a), and Article 33(4) bars the courts from hearing a tax dispute where no objection was first submitted to the Committee. Skipping a rung does not accelerate the process; it ends it.
Small disputes stop at the Committee. Under Article 33(3) the Committee’s decision is final where the total of due tax and administrative penalties does not exceed AED 100,000, and under Article 34(1) those decisions are executory instruments. Above that figure, either side has 40 business days to appeal before the decision becomes enforceable.
Note also that Article 28 and Article 29 cannot run in parallel on the same assessment. Article 28(5) prevents a review request being made or continued where a reconsideration request has already been filed, and Article 29(3) prevents the reverse. Choose one route and see it through.
How to Fix a Tax Error, Step by Step
- Quantify the tax difference for each affected tax period separately, and record the date you became aware of it.
- Apply the AED 10,000 test. Above it, prepare a voluntary disclosure. At or below it, identify the return in which to correct it.
- File within 20 business days of awareness where a voluntary disclosure is required, through EmaraTax.
- Pay the underlying tax within 20 business days of submitting the disclosure, before the 14% per annum charge begins to run.
- Check the penalty assessment when it arrives. If you disagree, start the ladder with a reconsideration request within 40 business days.
Frequently Asked Questions
What is the penalty for a voluntary disclosure in the UAE?
A monthly penalty of 1% on the tax difference, for each month or part of a month, running from the day after the due date of the return or refund application until the disclosure is submitted. There is no longer a tiered penalty based on how old the error is.
What happens if the FTA finds the error before I disclose it?
A fixed penalty of 15% on the tax difference applies in addition to the 1% monthly charge. Where you disclose after being notified of an audit, the monthly charge runs to the disclosure date; where you never disclose, it runs to the date the tax assessment is issued.
When must I submit a voluntary disclosure?
Within 20 business days of becoming aware of the error, where it understated payable tax by more than AED 10,000. Errors of AED 10,000 or less are corrected in a tax return instead, unless no return is available to correct them in.
How much notice does the FTA give before a tax audit?
At least 10 business days under Article 16(2) of the Tax Procedures Law. An auditor may enter without prior notice for up to 72 hours in defined cases, including serious grounds to suspect tax evasion or an attempt to obstruct the audit, subject to obtaining the required authorization.
How far back can the FTA audit my business?
Generally five years from the end of the relevant tax period. If audit procedures were notified before that expiry, the Authority has four more years from the notification to complete the audit or issue the assessment. If the matter relates to a voluntary disclosure filed in the fifth year, it has one year from that disclosure.
Do I have to pay a tax penalty before I can challenge it?
You must pay the tax in full before an objection to the Tax Disputes Resolution Committee will be accepted, under Article 32(2)(b). The provision refers to the tax, not to the administrative penalties, so the penalties themselves can be disputed without settling them first.
How long do I have to challenge an FTA decision?
Forty business days at each stage: to request a review of an assessment, to request reconsideration, to object to the Committee, and to appeal a Committee decision to court. Missing any of these windows makes the next stage inadmissible.
Is there a cap on UAE tax penalties?
The Tax Procedures Law caps the total administrative penalties arising from a tax assessment at 200% of the due tax. The removal of the old compounding late-payment structure in April 2026 makes reaching that cap much less likely than it was.
Do these penalties apply to corporate tax as well?
No. This schedule covers the Tax Procedures Law, VAT and excise. Corporate tax penalties sit in Cabinet Decision No. 75 of 2023, although the methodology has been aligned. The corporate tax filing deadlines and their own penalties are set out separately.
What is the Tax Disputes Resolution Committee?
A permanent committee chaired by a member of the judicial authority with two expert members from the register of tax experts, appointed by the Minister of Justice in coordination with the Minister of Finance. It decides objections to the Authority’s reconsideration decisions and cases where the Authority failed to decide a reconsideration request.
Official Sources
- Cabinet Decision No. 40 of 2017 and its amendments, including Cabinet Decision No. 129 of 2025, on Administrative Penalties
- Federal Decree-Law No. 28 of 2022 on Tax Procedures and its amendments
- Cabinet Decision No. 74 of 2023, Executive Regulation of the Tax Procedures Law
- Federal Tax Authority – Legislation library
- Federal Tax Authority – official portal and EmaraTax access
Information is current as of August 2026. Every penalty figure above was read from the consolidated text of Cabinet Decision No. 40 of 2017 as amended by Cabinet Decision No. 129 of 2025 (effective 14 April 2026) as published in the Federal Tax Authority legislation library, and every procedural rule and deadline from the consolidated Federal Decree-Law No. 28 of 2022 as amended by Federal Decree-Law No. 17 of 2025 and from Cabinet Decision No. 74 of 2023. Three limitations are stated rather than smoothed over. Those consolidated texts carry the notice that they are not official translations, so the Arabic original prevails on wording. The 200% cap on penalties arising from an assessment sits in the Tax Procedures Law and its application to a specific assessment depends on how the Authority characterizes each penalty, so it should not be treated as a predictable ceiling in planning. And the corporate tax penalty schedule under Cabinet Decision No. 75 of 2023 was not read in full for this guide and is referenced only to mark the boundary of what this schedule covers. This is general information, not tax advice. A disclosure or dispute with real money at stake should go to a registered tax agent or tax counsel before filing.
