UAE Tax Alert | UAE Cabinet Decision No. 129 of 2025
Significant Amendments to Administrative Tax Penalties
On 9 October 2025, the UAE Cabinet issued Cabinet Decision No. 129 of 2025, introducing major amendments to Cabinet Decision No. 40 of 2017 on the Administrative Penalties for Violations of Tax Laws.
Effective from 14 April 2026, this Decision replaces the framework introduced under Cabinet Decisions Nos. 49 and 108 of 2021 and aligns the penalty regime with Federal Decree-Law No. 28 of 2022 on Tax Procedures.
The amendments represent a structural and conceptual overhaul of the UAE’s administrative penalty system transitioning from a punitive, compounding model to a proportionate, transparent, and compliance-focused framework. The changes aim to encourage voluntary disclosure, improve predictability, and reduce excessive fines for minor noncompliance.
Key Amendments Introduced
1. Alignment with the Updated Tax Procedures Law
All legal references now align with Federal Decree-Law No. 28 of 2022 on Tax Procedures, replacing references to the previous 2017 Tax Procedures Law. This ensures consistency between the administrative penalty framework and the current procedural and enforcement rules governing Federal Tax Authority (FTA) operations. In addition, the Decision introduces new defined terms, including “Tax Assessment,” “Voluntary Disclosure,” and “Legal Representative,” providing clarity and uniform interpretation across the tax system.
2. Simplification and Reduction of Penalty Amounts
Many monetary penalties have been significantly reduced to better reflect proportionality and to distinguish between minor administrative oversights and deliberate noncompliance.
|
Violation Description |
Old Penalty (49 & 108 of 2021) |
New Penalty (129 of 2025) |
Change / Impact |
|
Failure to keep required records and other information |
AED 10,000 for the first time; AED 20,000 in case of repetition. |
AED 10,000 for each violation; AED 20,000 if repeated within 24 months. |
Addition of 24 months period |
|
Failure to submit data, records, and documents in Arabic when requested |
AED 20,000. |
AED 5,000. |
Penalty significantly reduced from AED 20,000 to AED 5,000. |
|
Failure to submit a registration application within timeframe |
AED 10,000. |
AED 10,000. |
No change. |
|
Failure to submit a deregistration application within timeframe |
AED 1,000 in case of delay, and on the same date monthly thereafter, up to a maximum of AED 10,000. |
AED 1,000 in case of late submission monthly, up to a maximum of AED 10,000. |
No change (same monthly structure). |
|
Failure to inform Authority of amendments to tax record |
AED 5,000 for the first time; AED 10,000 in case of repetition. |
AED 1,000 for each violation; AED 5,000 if repeated within 24 months. |
Penalties lowered and repetition timeframe set to 24 months. |
|
Failure of Legal Representative to notify appointment within timeframe |
AED 10,000. |
AED 1,000. |
Penalty reduced tenfold from AED 10,000 to AED 1,000. |
|
Failure of Legal Representative to file Tax Return within timeframe |
AED 1,000 for first time; AED 2,000 if repeated within 24 months. |
AED 1,000 for first time; AED 2,000 if repeated within 24 months. |
No change. |
|
Failure of Registrant to submit Tax Return within timeframe |
AED 1,000 for first time; AED 2,000 if repeated within 24 months. |
AED 1,000 for first time; AED 2,000 if repeated within 24 months. |
No change. |
|
Failure to settle Payable Tax within timeframe |
2% of unpaid Tax due next day + 4% monthly after one month (up to 300%). |
14% annual rate (1.167% monthly) applied on unsettled Payable Tax. |
Calculation simplified and reduced from compounding to flat annual rate. |
|
Submission of incorrect Tax Return |
AED 1,000 first time; AED 2,000 if repeated. Exception: minimum AED 500 if tax difference smaller. |
AED 500 unless corrected before due date or via Voluntary Disclosure with no tax difference. |
Penalty reduced to AED 500 and waived for prompt correction. |
|
Submission of a Voluntary Disclosure (error correction) |
Tiered penalty:
|
1% monthly penalty on Tax Difference from due date until submission. |
Simplified to continuous 1% per month instead of yearly tiers. |
|
Failure to voluntarily disclose before being notified of audit |
50% fixed + 4% monthly on unpaid tax or ineligible refund. |
15% fixed + 1% monthly on Tax Difference (time-based until disclosure or assessment). |
Significantly reduced penalties, both fixed and monthly portions. |
|
Failure to facilitate Tax Auditor |
AED 20,000. |
AED 20,000 (clarified that applies to Person, Legal Representative, or Tax Agent). |
No change in amount; liability scope clarified. |
|
Failure to calculate tax on behalf of another person |
2% on day after due date + 4% monthly (max 300%). |
14% per annum monthly penalty on unsettled Payable Tax. |
Simplified calculation; lower effective penalty. |
|
Failure to account for tax due on imports |
50% of unpaid or undeclared tax. |
50% of unpaid or undeclared tax. |
No change. |
|
Excise: Failure to display prices inclusive of Tax |
AED 5,000. |
AED 5,000. |
No change. |
|
Excise: Failure to comply with transfer/designated zone procedures |
Higher of AED 50,000 or 50% of tax on goods. |
Higher of AED 50,000 or 50% of tax on goods. |
No change. |
|
Excise: Failure to provide price lists for excise goods |
AED 5,000 for first time; AED 10,000 in case of repetition. |
AED 5,000 for first time; AED 10,000 in case of repetition. |
No change. |
|
VAT: Failure to display prices inclusive of Tax |
AED 5,000. |
AED 5,000. |
No change. |
|
VAT: Failure to notify of applying tax based on Margin |
AED 2,500. |
AED 2,500. |
No change. |
|
VAT: Failure to comply with designated zone conditions |
Higher of AED 50,000 or 50% of tax on goods. |
Higher of AED 50,000 or 50% of tax on goods. |
No change. |
|
VAT: Failure to issue Tax Invoice when making supply |
AED 2,500 for each detected case. |
AED 2,500 for each detected case (clarified timeframe). |
Same amount; timeframe clarified. |
|
VAT: Failure to issue Tax Credit Note |
AED 2,500 for each detected case. |
AED 2,500 for each detected case. |
No change. |
|
VAT: Failure to comply with e-invoicing/e-credit note procedures |
AED 2,500 for each detected case. |
AED 2,500 for each detected case. |
No change. |
Overall Impact for Businesses
The 2025 amendments represent a decisive modernization of the UAE tax compliance framework. Businesses will benefit from:
- Reduced administrative burden and clearer penalty structures.
- Predictable, time-based penalty rates facilitating easier forecasting and accounting treatment.
- Incentives for voluntary correction through proportionate monthly penalties.
- Improved legal clarity via defined terms and formal objection mechanisms.
- Elimination of legacy relief schemes, simplifying compliance management.
The Cabinet Decision No. 129 of 2025 significantly enhances transparency, fairness, and proportionality in the UAE’s administrative penalty system.
By simplifying penalty computation, aligning with international norms, and embedding procedural clarity, the UAE strengthens its position as a globally aligned, compliance-focused tax jurisdiction.
Businesses should review their tax compliance procedures, update their voluntary disclosure policies, and ensure readiness before April 2026 to benefit from the revised framework.
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