New UAE tax penalties from 14 April 2026: what changed for VAT and excise
By the Decent Accounting tax team · Updated · 6 min read
From 14 April 2026, Cabinet Decision No. 129 of 2025 changed the penalties for VAT and excise tax in the UAE. Late payment is now charged at 14% a year, calculated monthly, and penalties for correcting your own errors through a voluntary disclosure dropped to around 1% per month of the tax difference. Some fixed penalties also changed, so check the Federal Tax Authority (FTA) penalty table for your specific case.
Key points
- The new rules apply to VAT and excise tax from 14 April 2026. Corporate tax penalties are separate.
- Late payment: 14% per year, calculated monthly, replaces the old 2% plus 4% monthly regime.
- Voluntary disclosure: around 1% per month of the tax difference, down from a scale that could reach 40%.
- Some fixed penalties changed. Amounts depend on the violation, so check the FTA table.
- Correcting errors yourself, early, is now much cheaper than waiting for an FTA audit.
Why the rules changed
The UAE's VAT penalty schedule had been in place since 2021 (Cabinet Decision No. 49 of 2021). It relied on large percentage charges that built up quickly. A business that paid a few weeks late could end up with a penalty out of proportion to the delay.
The new decision moves to a time-based approach. You pay for how long the tax was outstanding, at a rate closer to an interest charge. It also lowers the cost of owning up to mistakes, which encourages businesses to correct returns before the FTA finds the error.
Before and after: the headline changes
| Area | Before 14 April 2026 | From 14 April 2026 |
|---|---|---|
| Late payment of VAT or excise | 2% straight after the due date, then 4% charges on the amount still unpaid, capped at 300% of the tax | 14% per year on the unpaid amount, calculated monthly |
| Voluntary disclosure of an error | A fixed penalty plus a percentage of the tax difference that rose with time, from 5% up to 40% | Around 1% per month of the tax difference |
| Other fixed penalties (for example, incorrect returns) | Fixed amounts from the 2021 schedule | Some amounts changed; check the FTA table |
| Late VAT registration | AED 10,000 | AED 10,000 |
How the new rates apply to tax that was already overdue on 14 April 2026 depends on the transitional rules. If you had unpaid tax or an open error at that date, check your position with the FTA or with us.
What 14% a year means in practice
Take a business that owes AED 50,000 of VAT for a quarter and pays it three months late.
- 14% a year is about 1.17% a month.
- 1.17% of AED 50,000 is about AED 583 a month.
- Three months late comes to roughly AED 1,750.
Under the old regime, the 2% and 4% charges alone would have been well above that amount. The new system is less harsh for short delays, but it still grows every month the tax stays unpaid. Paying late is never free.
What a voluntary disclosure costs now
A voluntary disclosure is the form you submit on EmaraTax to correct an error in a return you have already filed.
Suppose you find that you under-declared VAT by AED 20,000 in a return whose payment deadline was 10 months ago. At around 1% per month, the voluntary disclosure penalty would be roughly AED 2,000. Under the old scale, a fixed penalty and a percentage of the tax were both charged, so the same correction often cost more.
When you must use a voluntary disclosure for VAT:
| Size of the error (tax difference) | What to do |
|---|---|
| More than AED 10,000 | Submit a voluntary disclosure |
| AED 10,000 or less | You can correct it in the return for the period in which you found the error |
The lower rate is for errors you correct yourself. Errors the FTA finds during an audit are penalised more heavily. If you know something is wrong, disclose it before the FTA contacts you.
Excise tax
The same changes to late payment and voluntary disclosure penalties apply to excise tax. Excise returns are filed monthly, so a process problem repeats twelve times a year. If you import, produce or stockpile excise goods such as tobacco, energy drinks, carbonated drinks or sweetened drinks, review your monthly process now. Our excise tax service covers registration and monthly returns.
How to reduce your penalty exposure
You can't negotiate the rates, but you can control most of the triggers.
Pay on time, even if the return needs work
The late payment penalty is charged on the unpaid amount. If a return is late because you are waiting for documents, pay your best estimate by the deadline. You can correct the return later.
Reconcile before you file
Most VAT errors come from the books, not the return form. Before each quarterly return:
- Reconcile your VAT control account to the general ledger.
- Check sales invoices for the right VAT treatment (standard, zero-rated, exempt).
- Confirm every input tax claim has a valid tax invoice.
- Review reverse charge items on imported services.
- Check credit notes are recorded in the right period.
Our VAT return filing service includes these checks before we submit the return through your EmaraTax account.
Review past returns now
Look back over the last few years of returns, especially if your bookkeeping changed hands. If you find an error, the cost of disclosing it today is lower than it would have been before April 2026, and lower than waiting for an audit.
Check your registration status
If your taxable supplies have passed AED 375,000 in the past 12 months, or will in the next 30 days, you must register. The late registration penalty is AED 10,000. If you have stopped making taxable supplies, you must apply to deregister within 20 business days, and a fixed penalty applies if you are late. See our VAT services for registration and deregistration.
Put the deadlines in a calendar
Most penalties come from dates that were known in advance. Set reminders for:
- VAT returns and payment: the 28th day after each VAT period ends.
- Excise returns: monthly.
- VAT deregistration: 20 business days from the date you became eligible.
- Any voluntary disclosure you have decided to make: as soon as the figures are confirmed.
Give the reminders to two people, so a holiday or a resignation doesn't cause a missed filing.
Use the review routes if you disagree
If you receive a penalty you think is wrong, you can submit a reconsideration request through EmaraTax. The deadline is currently 40 business days from being notified, so act quickly. A separate penalty waiver request is also available where you have good grounds. Neither is guaranteed, but a well-documented request gives you the best chance.
Next steps
Start by checking whether any past return needs correcting, and whether your current process would catch errors before the next deadline. You can read the decision and the official penalty table on the FTA website.
To see what monthly bookkeeping and quarterly VAT returns would cost, get an instant estimate. If you want us to review past returns or prepare your next one, see our VAT return filing service.
Frequently asked questions
Do the April 2026 penalty changes apply to corporate tax?
No. Cabinet Decision No. 129 of 2025 covers VAT and excise tax. Corporate tax penalties are set by separate rules, including the AED 10,000 penalty for late corporate tax registration.
Can I ask the FTA to cancel a penalty?
You can submit a reconsideration or penalty waiver request through EmaraTax, with reasons and supporting documents. The FTA decides each case on its facts, so there is no guarantee, but a clear, well-documented request has a better chance.
Where can I see the official penalty amounts?
The FTA publishes legislation and penalty schedules on its website at tax.gov.ae. Check the table that applies to the date of your violation, because amounts changed on 14 April 2026.
Is late VAT registration still penalised?
Yes. Registering late for VAT carries a fixed penalty of AED 10,000. If your taxable supplies have passed AED 375,000 in the last 12 months, register now.
This guide is general information, not tax advice for your specific situation. Rules change; check the Federal Tax Authority website or ask us before acting.