AED 10,000
Late VAT registration
A one-time fixed penalty applies if you fail to register for VAT by the date you were required to. It is charged once, not per month.
Tax guide · UAE
UAE VAT penalties: the 2026 regime
A new penalty regime under Cabinet Decision 129 of 2025 took effect on 14 April 2026. Here is exactly what UAE businesses now pay for late registration, late payment, late filing, incorrect returns, and voluntary disclosures.
What changed in 2026
The UAE Federal Tax Authority administers VAT penalties to encourage timely, accurate compliance. In 2026 the framework was overhauled: Cabinet Decision 129 of 2025 introduced a new schedule of administrative penalties that came into force on 14 April 2026.
The most significant change is how late payment is charged. The previous model — a fixed percentage on the due date plus a monthly percentage — has been replaced by a cleaner annual rate of 14% per annum, accrued monthly on the outstanding tax. Fixed penalties for late registration, late filing, and incorrect returns remain, at the amounts set out below.
Understanding the figures is the first step; the more valuable step is building a filing routine that keeps you clear of them. This guide covers both.
The 2026 VAT penalty schedule
These are the current administrative penalties for the most common VAT breaches under the new regime.
14% per annum
Late payment of VAT
Outstanding VAT accrues a late-payment penalty of 14% per annum, applied monthly on the unpaid amount. The older 2% immediate plus 4% monthly model no longer applies.
AED 1,000 / AED 2,000
Late filing of VAT return
Filing the VAT 201 late is AED 1,000 for the first offence, rising to AED 2,000 if you file late again within 24 months.
AED 500 / AED 2,000
Incorrect VAT return
Submitting an incorrect return is AED 500 for the first instance and AED 2,000 for a repeat, separate from any tax and interest-style charges on the shortfall.
1% per month
Voluntary disclosure
Correcting an error yourself carries 1% per month on the tax difference. If you disclose only after the FTA has notified an audit, a further 15% is added.
These figures reflect the FTA VAT penalty regime in force from 14 April 2026 under Cabinet Decision 129/2025. Always confirm the current position on the FTA website before acting on a specific case.
How UAE businesses stay penalty-free
Almost every VAT penalty comes down to timing or accuracy. Register on time, file and pay by the 28th-day deadline, and get your treatments right, and the schedule above never touches you.
Need help staying ahead? Our VAT filing service prepares and files each VAT 201 on time, or learn the mechanics in how to file a VAT return.
- Register on time — the AED 375,000 threshold is tested on a rolling 12-month basis, not only at year-end.
- File every VAT 201 by the 28th-day deadline, even a nil return.
- Pay the net VAT due by the same deadline — late payment now accrues at 14% per annum.
- Get treatments right the first time — zero-rated, exempt, and standard supplies are reported differently.
- Fix errors early through voluntary disclosure, before any FTA audit notification, to keep the cost at 1% per month.
- Keep valid tax invoices and records for the statutory retention period.
How AIMuhaseb helps
Never miss a VAT deadline again
AIMuhaseb tracks your tax period, applies the correct VAT treatment as you record each transaction, and generates an FTA-ready VAT 201 from your books — so returns go in on time and figures tie out. Combined with our managed filing, that keeps you clear of the penalties above.
Deadline tracking for every tax period
Correct 5% / zero-rated / exempt treatment
FTA-ready VAT 201 from your ledger
Voluntary-disclosure support if needed
FAQ
UAE VAT penalty questions, answered
What are the new UAE VAT penalties in 2026?
A new VAT penalty regime under Cabinet Decision 129 of 2025 came into force on 14 April 2026. Headline figures are: late registration AED 10,000 (one-time); late payment of VAT at 14% per annum accrued monthly on the outstanding tax; late filing of a VAT return AED 1,000 first time and AED 2,000 for a repeat within 24 months; an incorrect return AED 500 first time and AED 2,000 for a repeat; and voluntary disclosure at 1% per month on the tax difference, plus a further 15% if disclosed after an audit notification.
How is the late-payment penalty calculated now?
Late payment of VAT accrues at 14% per annum, applied monthly on the amount of tax that remains outstanding. This replaced the previous structure of a fixed percentage on the due date plus a monthly percentage. The longer the tax stays unpaid, the more the penalty builds, so settling promptly matters.
What is the penalty for filing a VAT return late?
A late VAT 201 is AED 1,000 for the first late filing. If you file late again within 24 months of the previous late filing, the penalty rises to AED 2,000. This applies even to nil returns, so you should file on time regardless of whether tax is due.
What happens if my VAT return is incorrect?
An incorrect return carries a fixed penalty of AED 500 for the first instance and AED 2,000 for a repeat. That is separate from the tax itself and from any late-payment charge on the shortfall. Correcting the error through a voluntary disclosure can reduce the overall cost compared with the FTA finding it during an audit.
How much does a voluntary disclosure cost?
A voluntary disclosure carries a penalty of 1% per month on the tax difference being corrected. Crucially, if you make the disclosure only after the FTA has already notified you of an audit, an additional 15% is applied. Disclosing early, before any audit notice, keeps the cost lowest.
What is the penalty for registering for VAT late?
Failing to register for VAT by the required date carries a one-time fixed penalty of AED 10,000. Because the AED 375,000 mandatory threshold is tested on a rolling 12-month basis, it is easy to cross without noticing — which is why monitoring turnover continuously matters.
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Stay ahead of VAT penalties
Tell us about your VAT position — behind on returns, worried about an error, or just want it handled — and a UAE specialist will get back to you.