UAE VAT penalties in 2026: what each mistake costs since 14 April

Since 14 April 2026, UAE VAT penalties are set by Cabinet Decision No. 129 of 2025. Late payment now costs 14% a year, charged monthly on the unpaid VAT, and an incorrect return costs a fixed AED 500. Errors you correct yourself through a voluntary disclosure cost 1% of the underpaid tax for each month since the return was due, and if the Federal Tax Authority (FTA) finds the error after telling you it will audit you, a fixed 15% is added on top.

This guide lists every main VAT penalty, explains what changed, and works through examples. It applies to VAT and to excise tax, which share the general penalty table (each tax also has a short table of its own). Amounts are taken from the consolidated Cabinet Decision No. 40 of 2017 as amended, published on tax.gov.ae, and were checked on 30 October 2026.

UAE VAT penalties at a glance

Violation	Penalty (AED)
Registering for VAT late	10,000
Filing a VAT return late	1,000 the first time; 2,000 for a repeat within 24 months
Paying VAT late	14% a year, charged monthly on the unpaid tax
Filing an incorrect return	500, unless corrected before the filing deadline or by a voluntary disclosure that changes no tax
Voluntary disclosure that changes the tax	1% of the tax difference for each month or part of a month
Error not disclosed before an audit notice	Fixed 15% of the tax difference, plus 1% a month
Not keeping the required records	10,000; 20,000 for a repeat within 24 months
Not giving records in Arabic when asked	5,000
Not telling the FTA about a change to your registration details	1,000; 5,000 for a repeat within 24 months
Deregistering late	1,000 a month, up to 10,000
Not helping a tax auditor	20,000
Not issuing a tax invoice or tax credit note on time	2,500 for each case
Not showing prices inclusive of VAT	5,000
Not accounting for VAT on imported goods	50% of the unpaid or undeclared tax

The Tax Procedures Law caps any administrative penalty at twice the tax it relates to (Article 24). Paying a penalty does not cancel the tax itself, which is still due.

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. It amended the 2017 penalty decision for VAT and excise and brought it into line with corporate tax. The main changes:

• Late payment. The old ladder (2% straight after the deadline, 4% on the seventh day, then 1% a day from one month after the deadline, capped at 300%) is gone. Late VAT now attracts 14% a year, charged monthly, the same rate as corporate tax.
• Incorrect returns. The fixed penalty is now AED 500, and it is not charged at all if you correct the return before its filing deadline.
• Voluntary disclosures. A disclosure that changes the tax now costs a flat 1% of the tax difference for each month, so a mistake found quickly costs little.
• Smaller fixed penalties. Failing to update your registration details drops to AED 1,000 (from AED 5,000), and failing to give records in Arabic drops to AED 5,000 (from AED 20,000).

Some penalties did not change. Late registration is still AED 10,000, and a late return is still AED 1,000, or AED 2,000 for a repeat within 24 months.

Late registration, late returns and late payment

Registration. A UAE business must register once its taxable supplies pass AED 375,000 in 12 months, and apply within 30 days of becoming required to. Registration is free. A non-resident business with no UAE establishment has no threshold at all and must register from its first taxable supply if no one in the UAE accounts for the VAT. Missing the deadline costs AED 10,000.

Returns. Each VAT return, and the VAT due, must reach the FTA within 28 days of the end of the tax period. A late return costs AED 1,000 the first time and AED 2,000 for each repeat within 24 months. The penalty applies to the return; late payment is charged separately.

Payment. Unpaid VAT attracts a penalty of 14% a year, charged for each month or part of a month from the day after the due date. In practice that is about 1.17% of the unpaid VAT each month. When you make a voluntary disclosure, or receive a tax assessment, you have 20 business days to pay before this penalty starts to run.

Errors: incorrect returns, voluntary disclosures and audits

If the error changes no tax (for example, an amount in the wrong box), correct it in the return before the filing deadline or, where the FTA requires it, by voluntary disclosure. Either way the AED 500 incorrect-return penalty is not charged.

If the error means you paid too little VAT, the law requires you to file a voluntary disclosure as soon as you find it. The penalty is 1% of the tax difference for each month or part of a month, counted from the day after the original return was due until the day you file the disclosure. Pay the difference within 20 business days of filing, or the 14% late-payment penalty starts as well.

If the FTA tells you it will audit you first, it becomes much more expensive. You face a fixed penalty of 15% of the tax difference, plus the 1% a month, which runs until you file a disclosure or, if you never file one, until the FTA issues its assessment.

Time limit. A voluntary disclosure cannot normally be filed more than five years after the end of the tax period concerned. If you overpaid, a disclosure is optional, and refund claims also have a five-year limit.

Read UAE VAT voluntary disclosure and reconsideration for the step-by-step process on EmaraTax.

Records, invoices and other penalties

Records. VAT records must be kept for at least five years after the end of the tax period, or 15 years for real estate. That means invoices, credit notes, import documents, contracts, ledgers and the workings behind each return. Missing records cost AED 10,000, or AED 20,000 for a repeat within 24 months. If the FTA asks for records in Arabic and you cannot provide them, the penalty is AED 5,000. From 1 October 2026, FTA Decision No. 13 of 2026 also expects documented checks on your suppliers before you claim input VAT. See UAE bookkeeping and record-keeping rules.

Invoices. Failing to issue a tax invoice or a tax credit note on time costs AED 2,500 for each case found, and the same applies to failures under the rules for issuing them electronically. The separate e-invoicing penalties that come with the national e-invoicing system are covered in UAE e-invoicing penalties and accredited providers.

Deregistration. If you stop making taxable supplies, apply to deregister on time. A late application costs AED 1,000 a month, up to AED 10,000. See UAE corporate tax and VAT deregistration.

Worked examples, and how to reduce a penalty

Situation	How it is worked out	Penalty (AED)
First late VAT return	Fixed amount	1,000
Second late return within 24 months	Fixed amount	2,000
AED 40,000 of VAT paid 2 months and 10 days late	40,000 × 14% ÷ 12 × 3 months (a part month counts as a month)	1,400
AED 20,000 underpaid, found by you and disclosed 6 months after the return was due	20,000 × 1% × 6 months	1,200 (pay within 20 business days to avoid the 14%)
The same AED 20,000, disclosed only after an audit notice, 6 months after the due date	20,000 × 15% + 20,000 × 1% × 6 months	4,200
Incorrect return that changes no tax, corrected after the filing deadline (not by disclosure)	Fixed amount	500
Records missing for the second time within 24 months	Fixed amount	20,000

The examples show the penalty only. The underpaid VAT itself is always due as well.

How to keep penalties down.

• Disclose early. The 1% a month means a mistake found in month two costs a fraction of one found in month twelve, and disclosing before an audit notice avoids the 15%.
• Pay disclosed tax within 20 business days, so the 14% late-payment penalty never starts.
• Reconcile before you file. Correcting a return before its deadline avoids the AED 500.
• Challenge a penalty you think is wrong. File a reconsideration request within 40 business days of the FTA's decision. It is free, and the FTA answers within 45 business days.

How Cosmos helps. Cosmos keeps the books and files UAE corporate tax and VAT returns through an FTA-registered tax agent. Returns are reconciled before they go in, deadlines sit on one calendar, and if we find an error we prepare the voluntary disclosure with you before it grows. Cosmos is not an audit firm. See Cosmos tax, what an FTA-registered tax agent does, or book a call. For corporate tax penalties, see the corporate tax filing deadline and late penalties, the corporate tax penalty waiver and our main UAE corporate tax guide.

FAQ

What is the penalty for late VAT payment in the UAE?

Since 14 April 2026, 14% a year on the unpaid VAT, charged for each month or part of a month from the day after the due date. That is about 1.17% a month. It replaced the old 2%, 4% and 1%-a-day penalties.

What is the penalty for filing a VAT return late?

AED 1,000 the first time, and AED 2,000 for each repeat within 24 months. Late payment of the VAT on that return is charged separately at 14% a year.

What is the penalty for an incorrect VAT return?

AED 500. It is not charged if you correct the return before its filing deadline, or if a voluntary disclosure shows the error changed no tax.

How much does a VAT voluntary disclosure cost?

1% of the underpaid VAT for each month since the return was due, until you file the disclosure. If you only disclose after the FTA has notified you of an audit, a fixed 15% is added.

How long must I keep VAT records in the UAE?

At least five years after the end of the tax period, or 15 years for real estate. Missing records cost AED 10,000, or AED 20,000 for a repeat within 24 months.

What is the penalty for late VAT registration?

AED 10,000. Apply within 30 days of passing the AED 375,000 mandatory threshold. Non-resident businesses have no threshold and must register from their first taxable supply.

Can I appeal a VAT penalty?

Yes. File a reconsideration request with the FTA within 40 business days of the decision. It is free, and the FTA answers within 45 business days. If you disagree with the outcome, you can take it to the Tax Disputes Resolution Committee.