UAE Tax Penalty Amendments: What This Means for Your Business

As part of the UAE government’s continued efforts to enhance tax compliance and promote transparency, updates have been introduced to the administrative penalties framework under Cabinet Decision No. 40 of 2017.

These amendments, issued under Cabinet Decision No. 129 of 2025, will take effect from 14 April 2026 and will apply prospectively (not retroactively).

These changes are expected to have practical implications for how businesses manage their tax compliance and potential penalty exposure.

Overview of Key Changes

The revised framework introduces a more structured and proportionate approach to administrative penalties, with a greater emphasis on encouraging proactive compliance.

Key changes include:

• Targeted reductions in certain administrative penalties for specific violations
• Amendments to penalties relating to late payment of payable tax, including the continued application of monthly penalties on outstanding balances
• Revised calculation mechanisms for penalties associated with voluntary disclosures, particularly in relation to timing and disclosure status
• Updates to penalties relating to the submission of incorrect tax returns and the correction of errors
• Amendments to penalties linked to the failure to maintain accurate tax records and notify the Federal Tax Authority of relevant changes

We have highlighted selected areas of focus, which should not be considered a comprehensive summary of all applicable violations and administrative penalties.

Description of Violation	Administrative Penalty in AED
Failure of the Person conducting Business or who has an obligation under the Tax Procedures Law or the Tax Law to keep the required records and other information specified in the Tax Procedures Law and the Tax Law.	One of the following two penalties shall be imposed: – 10,000 for each violation. – 20,000 in each case of repeated violation within 24 months from the date of the last violation.
Failure of the Registrant to inform the Authority of any case that may require the amendment of the information pertaining to his tax record kept by Authority.	One of the following two penalties shall be imposed: – 1,000 for each violation. – 5,000 in each case of repeated violation within 24 months from the date of the last violation.
Failure of the Registrant to submit the Tax Return within the timeframe specified in the Tax Law.	1,000 for the first time. 2,000 in case of repetition within 24 months.
Failure of the Taxable Person to settle the Payable Tax within the timeframe specified in the Tax Law.	A monthly penalty of (14%) per annum, for each month or part thereof, imposed on the unsettled Payable Tax amount from the day following the due date of payment and on the same date monthly thereafter.
The Registrant submits an incorrect Tax Return.	500, unless the Registrant takes one of the following actions: – Corrects his Tax Return within the deadline specified for submitting the Tax Return pursuant to the Tax Law. – Submits a Voluntary Disclosure to correct the Tax Return without resulting in a difference in the amount of Due Tax.
Failure of the Taxable Person to issue a Tax Invoice or the alternative document when making any supply within the period legally specified.	2,500 for each detected case.
Failure of the Taxable Person to issue a Tax Credit Note or the alternative document within the period legally specified.	2,500 for each detected case.

Implications for Businesses

These amendments reflect a shift towards a more proportionate and behaviour-driven approach to enforcement.

In practice, the level of penalty exposure is increasingly influenced by how and when compliance issues are identified and addressed. Businesses that proactively review their position and respond to potential gaps are generally better positioned to manage and reduce their exposure.

It remains important to note that administrative penalties are separate from, and do not replace, the obligation to settle any due tax.

Recommended Next Steps

Businesses should consider reviewing their current tax compliance position in light of these changes, with particular focus on:

• The accuracy and completeness of tax filings and supporting records
• Timely submission of tax returns and settlement of liabilities
• Any areas where voluntary disclosures may require further assessment

Given the technical nature of these amendments and the potential implications of non-compliance, a professional review is strongly recommended to ensure that any risks or exposures are appropriately identified and addressed.

Trinity Group would be pleased to assist you in assessing your position and advising on the appropriate next steps.

How Trinity Group Can Assist You

Trinity Group can support you in understanding the impact of these amendments and managing your potential exposure by:

• Assessing your current tax compliance position and identifying areas of risk
• Highlighting potential exposures arising from historical filings and processes
• Advising on appropriate corrective actions, including voluntary disclosures where required
• Providing clarity on penalty implications and practical mitigation strategies
• Supporting your ongoing compliance to ensure alignment with regulatory requirements