FTA penalties for Corporate Tax, VAT and excise

Where FTA penalties come from

Administrative penalties for every federal tax rest on Article 24 of the Tax Procedures Law (Federal Decree-Law No. 28 of 2022). Where a business commits one of the violations it covers, the Federal Tax Authority issues an administrative penalties assessment. The amounts are set by Cabinet decision, one schedule for Corporate Tax and one for VAT and excise:

• Corporate Tax: Cabinet Decision No. 75 of 2023, in force from 1 August 2023 and amended by Cabinet Decision No. 10 of 2024 from 1 March 2024. It applies to Corporate Tax notwithstanding the older VAT and excise decision.
• VAT and excise: Cabinet Decision No. 40 of 2017, as amended. Its latest amendment, Cabinet Decision No. 129 of 2025, took effect on 14 April 2026 and brought most VAT and excise penalties into line with the Corporate Tax schedule.

Two rules apply across both schedules. A penalty does not replace the tax: the tax remains payable in full. And each administrative penalty may not exceed twice the amount of tax in respect of which it is imposed (Article 24(4) of the Tax Procedures Law).

Administrative penalties are not criminal penalties. Deliberate evasion is dealt with separately under Article 25 of the Tax Procedures Law, by imprisonment, a fine of one to three times the evaded tax, or either. Our page on tax evasion investigations covers that regime.

The penalty assessment

The business must be notified of an administrative penalties assessment within five business days of it being made. The assessment gives the business’s name and tax registration number, a reference number, the violation the penalty is for, the penalty imposed and the tax it relates to, if any, and the total due.

From the date of notification the penalty is a payable debt to the FTA. If it is not paid, the FTA can send a notice requiring payment within 20 business days. If it is still unpaid after that, the Director General can issue a decision that is enforceable through the execution judge of the competent court.

Notification also starts the time for challenging the penalty: 40 business days for a request for reconsideration. The rules on waivers and instalments, described below, say nothing about extending that period, so whether to challenge is the first decision to take.

Corporate Tax penalties

The schedule to Cabinet Decision No. 75 of 2023 has 14 rows. These are the main ones.

Some rows fall on people rather than the business. A legal representative who does not notify the FTA of their appointment (AED 1,000), or does not file a return on time, pays from their own funds, and so does a tax agent or legal representative who fails to facilitate an audit. A late declaration under the Corporate Tax Law carries the same monthly amounts as a late return.

For late payment, the due date is the thing to check. Corporate Tax is normally payable within nine months of the end of the tax period. Where the tax arises from a voluntary disclosure, the due date for this penalty is 20 business days after the disclosure is submitted; where it arises from a tax assessment, 20 business days after the assessment is received. As an illustration, reading 14% a year as one-twelfth of 14% each month: AED 120,000 due on 30 September and paid on 10 December would attract charges on 1 October, 1 November and 1 December of AED 1,400 each, AED 4,200 in all.

The two disclosure rows are where timing costs most. A business that corrects an error before an audit is notified pays only the monthly 1%; one that waits pays the fixed 15% as well. Our page on voluntary disclosures explains when a disclosure is required and what each route costs.

When a monthly penalty falls

The monthly Corporate Tax penalties (late deregistration, late returns and declarations, and late payment) are charged on the same date each month. Article 3 of Cabinet Decision No. 75 of 2023 deals with a month that has no matching date: the penalty falls on the last day of that month, and in every other month it returns to the date it was first imposed. A penalty first imposed on 30 January falls on 28 February (29 February in a leap year), then on 30 March.

The VAT and excise schedule appears to use a different rule. The Ministry of Finance’s consolidated text, an unofficial translation, notes against the monthly VAT and excise penalties a rule from Cabinet Decision No. 49 of 2021: a month with no matching date takes the first day of the following month. Because each month or part of a month counts, the dates on a disputed penalty are worth recounting.

VAT and excise penalties from 14 April 2026

Cabinet Decision No. 129 of 2025, issued on 9 October 2025, rewrote the general table of penalties that applies to VAT and excise from 14 April 2026. Most of its rows now match the Corporate Tax schedule: records, Arabic documents, late registration (AED 10,000), late deregistration, updating the tax record, late payment at 14% a year charged monthly, voluntary disclosure at 1% a month, 15% plus 1% a month where no disclosure is made before an audit is notified, and AED 20,000 for failing to facilitate an audit. The rows that still differ are these.

VAT also keeps its own table of fixed penalties, among them AED 5,000 for not displaying prices inclusive of tax and AED 2,500 for each detected case of a tax invoice or tax credit note not issued in time.

Several fixed amounts fell. The FTA’s announcement of the change gives three:

The FTA says the calculation of the late payment, incorrect return and disclosure penalties also changed; the new rules are the ones set out above. We have not seen a published FTA position on violations that straddle 14 April 2026, such as one that began before that date and continued after it. Where the answer changes the figure, it is a point to raise specifically rather than to assume either way.

Challenging a penalty, or asking for relief

There are two different things a business can do about a penalty, and they rest on different arguments.

• Challenge it. The argument is that the penalty is wrong: the violation did not happen, the dates or the tax difference are wrong, the months are miscounted, the wrong schedule was applied, or the cap is exceeded. Cabinet Decision No. 40 of 2017 says penalties are objected to under the Tax Procedures Law. That means a request for reconsideration to the FTA within 40 business days of notification (for a tax assessment and its related penalties there is also an optional review first), then, if needed, an objection to the Tax Disputes Resolution Committee (TDRC) and, above AED 100,000, the courts. An objection to the TDRC needs the tax in dispute paid first, and an appeal to the court needs at least half the penalties paid or guaranteed. Our page on reconsideration and the TDRC sets out each step.
• Ask for relief. The argument is that the penalty is correctly due, but should be waived in whole or in part, or paid in instalments, because of the circumstances. That is an application to an FTA committee under Cabinet Decision No. 105 of 2021, described below.

The two ask different questions: reconsideration asks whether the penalty is right; a waiver application asks whether, accepting that it is, it should still be collected. They can run together. A penalty under a reconsideration request can still be the subject of an instalment request, though not once it is before the TDRC or a court. Only one waiver or instalment request can be made for the same penalties, so it needs to be complete when it goes in.

Waivers and instalments

Requests to waive a penalty, or to pay it by instalments, go to a committee formed by decision of the Chairman of the FTA’s board of directors. The rules are in Cabinet Decision No. 105 of 2021, which the FTA still applies to these requests. The business makes the request on the FTA’s EmaraTax portal, itself or through its registered tax agent.

Instalments

The committee may allow penalties to be paid by instalments where all of these are met:

• the request covers unpaid penalties only
• the penalties come to at least AED 50,000, a figure the committee can adjust
• the penalties are not in dispute before the TDRC, the courts or another body hearing tax objections or appeals, although a reconsideration request does not count against this
• no payable tax is outstanding for the tax period the request concerns

The business undertakes to pay to the committee’s plan, and the committee can ask for a guarantee. If an instalment is missed, the committee can revoke the plan and either set a new one, where it accepts the reasons, or direct the FTA to collect.

Waivers

The committee may waive penalties, in whole or in part, only where the violation is not connected with a tax evasion crime, the request is made within the period the committee specifies, and the case falls within one of the categories the decision lists:

• death of the registered individual or the owner of a sole establishment, where it directly caused the failure
• illness of that person that prevented them from meeting the obligation on time
• death, illness or resignation of a key employee, where it is proven to have directly caused the failure
• restrictions or precautionary measures imposed by UAE government authorities that directly caused it
• a general malfunction in the FTA’s systems, payment gateways or telecommunication services that directly caused a category of persons to miss the obligation
• a custodial sentence served by the registered person or the owner of a sole establishment
• tax obligations met, and all tax paid, through the account of another registered person
• insolvency or bankruptcy, where the tax due before it was paid and the purpose was not to escape the penalties
• any other case the committee assesses

The business must also undertake that the violation has been corrected and will not be repeated, and the committee decides how much to waive at its discretion. Two things follow. That a business never tried to evade tax is a condition of a waiver, not a ground for one. And because most of the grounds turn on a direct cause, the evidence has to connect the event to the missed obligation and its dates.

How long it takes

The FTA’s Director General must put a complete request to the committee within 40 business days of receiving it, and the committee must decide within 60 business days after that. If it does not, the request is treated as rejected and that decision is final. The FTA then has 10 business days to notify the outcome. The FTA’s own service page puts the whole process at up to 110 business days.

None of this reaches the tax. The committee’s powers cover administrative penalties only: tax cannot be waived or paid by instalments under these rules, and tax left unpaid for the period rules out instalments on its penalties.

The Corporate Tax late-registration waiver

The Corporate Tax penalty for registering late is AED 10,000 (the last row of the schedule, as amended by Cabinet Decision No. 10 of 2024 from 1 March 2024). Apart from the committee route, the FTA operates a specific waiver of it, under a Cabinet decision effective from April 2025 and explained in its public clarification CTP006.

• The condition. The first Corporate Tax return, or for an exempt person the first annual declaration, is filed within seven months of the end of the first tax period or first financial year, rather than the usual nine.
• First period only. It applies only to the person’s first tax period.
• No request needed. Where the condition is met, the FTA says the penalty is waived without a reconsideration or waiver request. An unpaid penalty is removed; one already paid is credited to the EmaraTax account, where it can meet other tax liabilities or be claimed as a refund.
• Pending requests. A reconsideration request already pending for that penalty is treated as void; one already approved needs no further action.
• Tax groups. Where a tax group files its return within seven months, the waiver applies to any member for which that is its first tax period.

The waiver does not change the normal deadlines for filing the return and paying the tax. It covers the Corporate Tax registration penalty only, not the AED 10,000 penalty for registering late for VAT or excise. Where a first return missed the seven-month window, the penalty can still be tested on its facts, and the reconsideration and committee routes above still apply to it.

What to check when a penalty arrives

• the date of notification, and the 40-business-day date it sets
• which schedule the FTA has applied, Corporate Tax or VAT and excise, and which version, given the change on 14 April 2026
• whether the violation described is what actually happened
• the dates the penalty runs between (the due date, any audit notification, any disclosure, the assessment) and the number of months or part months
• the tax difference a percentage penalty is applied to
• the cap of twice the tax
• for late registration, whether the seven-month waiver should already have removed it

How we help

• Read the penalty assessment and identify the violation and the schedule it relies on
• Recompute the penalty from the records: the dates, the months, the tax difference and the cap
• Check whether the late-registration waiver or the pre-audit disclosure rate should apply
• Advise whether the case is a challenge, a waiver or instalment request, or both, and in what order
• Draft the reconsideration request, or the waiver or instalment request, with its evidence and undertakings
• Say at the outset where evasion is alleged and a UAE advocate is needed

Further reading

• UAE tax disputes: an overview
• Reconsideration, the TDRC and the courts
• Voluntary disclosures to the FTA
• FTA tax audits
• Corporate Tax audits
• Tax evasion investigations