Introduction
The UAE’s system of Administrative Penalties has undergone one of its most significant transformations since the introduction of VAT and Excise Tax in 2017. With Cabinet Decision No. 129 of 2025, effective 14 April 2026, the Government has recalibrated the framework governing penalties across all Federal taxes, aligning it with the Tax Procedures Law (Federal Decree-Law No. 28 of 2022) and the Corporate Tax Law (Federal Decree-Law No. 47 of 2022).
This latest Decision replaces the heightened, percentage-based penalty structure introduced under Cabinet Decision No. 108 of 2021, marking a clear policy shift from deterrence to proportionality and from fragmentation toward harmonisation. The reform also represents a structural convergence of all tax penalty regimes, ensuring that VAT, Excise, and Corporate Tax are now interpreted and administered under one cohesive procedural logic.
When the new regime applies:
- Until 13 April 2026: Cabinet Decision No. 108 of 2021 governs VAT and Excise penalties.
- From 14 April 2026: Cabinet Decision No. 129 of 2025 governs VAT and Excise penalties.
- Corporate Tax: Cabinet Decision No. 75 of 2023 applies from 1 August 2023 and continues unchanged.
From 2021 to 2025: A Chronology of Reform
Legislative Context and Policy Evolution
The evolution of the UAE’s Administrative Penalty framework reflects the broader development of its tax system. What began as a reactive enforcement model during the early VAT years has matured into a structured and proportionate compliance regime anchored in the 2022 Tax Procedures Law. Each reform has progressively aligned the Federal Tax Authority’s enforcement philosophy with international principles of fairness, transparency, and proportionality.
| Year | Cabinet Decision No. | Key Change | Policy Objective |
| 2017 | 40 of 2017 | Original Administrative Penalty regime for VAT & Excise. | Establish compliance and deterrence. |
| 2021 (Apr) | 49 of 2021 | Introduced 2% + 4% monthly late-payment formula & 30 % re-determination programme. | Simplify and clear backlog. |
| 2021 (Dec) | 108 of 2021 | Reinforced CD 49 of 2021 tables + extended relief to 2022. | Tighten enforcement. |
| 2023 | 75 of 2023 | Created stand-alone Corporate Tax penalty regime. | Expand to Corporate Tax under the TPL. |
| 2025 | 129 of 2025 | Re-aligned all VAT / Excise penalties with the CT model and the 2022 TPL. | Harmonisation & fairness. |
The Legal Alignment with the 2022 Tax Procedures Law
A defining feature of Cabinet Decision No. 129 of 2025 is its reliance on Federal Decree-Law No. 28 of 2022 on Tax Procedures, replacing all prior references to the 2017 TPL. This ensures that every Administrative Penalty decision, whether under Corporate Tax, VAT, or Excise, now uses the same definitions, timelines, and procedural concepts. Notably, Cabinet Decision No. 129 of 2025 refers expressly to the VAT Law and the Excise Tax Law, while the Corporate Tax penalty regime continues to sit separately under Cabinet Decision No. 75 of 2023.
The concepts of Tax Difference, Due Tax and Voluntary Disclosure are now aligned with the definitions in the 2022 Tax Procedures Law, eliminating inconsistencies that had persisted under the 2017 framework.
It is important to note that Article 24(4) of the Tax Procedures Law continues to impose a statutory limit whereby total Administrative Penalties arising from a tax assessment may not exceed 200 percent of the Due Tax. This cap remains separate from, and operates independently of, the penalty tables issued under the Cabinet Decisions. This statutory cap operates at the assessment level and continues to override the aggregate outcome of Administrative Penalties, providing a final ceiling even under the 2025 penalty framework.
Conclusion of Transitional Relief
The transitional relief introduced under Cabinet Decision No. 108 of 2021, which allowed penalties imposed before 28 June 2021 to be re-determined to 30 percent of their original value, has now expired. Cabinet Decision No. 129 of 2025 does not renew or extend this mechanism, signalling that the Federal Tax Authority considers the outstanding penalty backlog to be resolved and the system to have entered a stable compliance phase. The absence of a successor redetermination programme indicates that the Federal Tax Authority considers the historic penalty backlog from the 2017–2021 period to have been fully regularised.
Key Substantive Changes: From Cabinet Decision No. 108 of 2021 to Cabinet Decision No. 129 of 2025
Change Spotlight: How Violation Definitions Have Evolved (2021 to 2025)
While the monetary penalties introduced under Cabinet Decision No. 129 of 2025 have attracted most attention, the wording and scope of several violations have also been revised. In some cases, obligations have been broadened to capture a wider range of persons; in others, the language has been simplified and re-anchored in the 2022 Tax Procedures Law. The table below highlights the key changes in the description and effect of selected violations.
| Violation No. | 2021 Position (CD 49 of 2021 and CD 108 of 2021) | 2025 Position (CD 129 of 2025, amending CD 40 of 2017) | Nature of Change | Practical Impact |
| 1 – Record-keeping | Applied to the “Person conducting Business” who failed to keep records specified in the Tax Procedures Law and the Tax Law. | Applies to the Person conducting Business or any person who has an obligation under the Tax Procedures Law or the Tax Law to keep records. | Scope expanded beyond traditional VAT business registrants. | Captures non-business persons and other actors with record-keeping duties under CT, VAT and Excise, increasing the population exposed to this penalty. |
| 2 – Arabic records | Applied to the “Person conducting Business” who failed to submit records in Arabic when requested. | Applies to the Person conducting Business or any person with an obligation under the Tax Procedures Law or the Tax Law. | Scope expanded and amount reduced. | Aligns with CT and Excise documentation requirements and ensures that the Federal Tax Authority can enforce Arabic-records obligations across all tax types. |
| 5 – Updating information | Failure to inform the Authority of any circumstance requiring amendment of information in the Tax record. | Failure to inform the Authority of any case requiring amendment of information in the Tax record. | Drafting modernised and aligned with TPL terminology. | Substantive obligation remains, but the wording now mirrors the language of the 2022 Tax Procedures Law and reduces ambiguity. |
| 9 – Failure to settle Payable Tax | Failure to settle Payable Tax stated in a Tax Return, Voluntary Disclosure or Tax Assessment, with a 2 percent plus 4 percent monthly penalty capped at 300 percent. | Failure to settle the Payable Tax within the timeframe specified in the Tax Law, with a 14 percent per annum monthly penalty. | Violation reframed from scenario-based to principle-based and decoupled from the 300 percent cap mechanism. | The breach is now defined in terms of the Due Date under the TPL, providing a cleaner cross-tax rule and reducing disputes over when liability arises, especially for Voluntary Disclosures and Tax Assessments. |
| 10 – Incorrect Tax Return | Submittal of an incorrect Tax Return, with fixed penalties (1,000 / 2,000) or a minimum 500 penalty where the Tax Difference was small. | Incorrect Tax Return, but no penalty if corrected before the filing deadline or via a Voluntary Disclosure that does not create a Tax Difference. | Violation narrowed and linked directly to remedial behaviour. | Encourages timely self-correction and aligns the VAT and Excise framework with the Corporate Tax model in Cabinet Decision No. 75 of 2023. |
| 11 – Voluntary Disclosure | Submission of a Voluntary Disclosure on errors, subject to a tiered 5 to 40 percent penalty based on the age of the error. | Submission of a Voluntary Disclosure, subject to a 1 percent monthly penalty on the Tax Difference. | Percentage tiers replaced with a uniform monthly percentage. | Simplifies modelling of exposure and harmonises the treatment of Voluntary Disclosures across VAT, Excise and Corporate Tax. |
| 12 – Failure to submit a Voluntary Disclosure | Failure to voluntarily disclose errors before audit notification, subject to a 50 percent penalty plus 4 percent monthly. | Failure to submit a Voluntary Disclosure before audit notification, subject to a 15 percent fixed penalty plus a 1 percent monthly penalty on the Tax Difference. | Penalty quantum reduced and method aligned with the Corporate Tax regime. | Reduces punitive exposure while preserving a meaningful deterrent, and ensures consistent treatment of late disclosures across different tax heads. |
| 13 – Facilitation of Tax Audit | Failure of the Person conducting Business to facilitate the Tax Auditor. | Failure of the Person subject to Tax Audit, his Tax Agent, or Legal Representative to offer facilitation, with penalties due from their own funds. | Scope significantly expanded to include Tax Agents and Legal Representatives. | Increases audit-related risk for authorised representatives and confirms that failure to cooperate with an audit can trigger penalties directly on advisors and legal representatives, not only on the Taxable Person. |
Record-Keeping & Arabic Records
| Area | 2021 Regime | 2025 Regime | Impact |
| Record-keeping | 10,000 / 20,000 (repeat) | 10,000 first / 20,000 (repeat) | Remains unchanged |
| Arabic records | 20,000 | 5,000 | 75% reduction |
Late Registration / De-registration
No changes – remains AED 10,000 and AED 1,000 per month (max 10,000).
Updating Information and Legal Representative Obligations
| Violation | 2021 Penalty | 2025 Penalty | Comment |
| Failure to update records | 5,000 / 10,000 | 1,000 / 5,000 | Reduced. |
| Failure to notify appointment of Legal Rep | 10,000 | 1,000 | 90% reduction |
Failure to Settle Payable Tax
Under the 2021 regime, the violation was framed broadly as the failure of the Taxable Person to settle the Payable Tax stated in a Tax Return, a Voluntary Disclosure, or a Tax Assessment, with an explicit reference to the capped percentage-based penalty mechanism (2 percent + 4 percent monthly, capped at 300 percent). The structure of the violation placed strong emphasis on the different triggers for Payable Tax:
- Tax Return
- Voluntary Disclosure
- Tax Assessment
and separately listed the 20-business-day payment deadline applicable to Voluntary Disclosures and Assessments.
Under Cabinet Decision No. 129 of 2025, although the monetary penalty changes to a uniform 14 percent per annum model, the violation itself is significantly revised in three important ways:
- The violation is simplified and narrowed in its wording.
The new text describes the breach simply as “Failure of the Taxable Person to settle the Payable Tax within the timeframe specified in the Tax Law”.
This removes the explicit enumeration of returns, Voluntary Disclosures and tax assessments, and instead relies on the definition of Due Date under the 2022 Tax Procedures Law (Article 22).
Practically, this shifts the interpretive burden from the Cabinet Decision to the TPL, enhancing legal consistency. - The violation is now entirely decoupled from the former 300 percent cap language.
Under the previous regime, the penalty description itself included the cap mechanism, blending the violation with the penalty calculation method.
Under the new regime, the violation is conceptually cleaner: the offence is the failure to settle on time, while the penalty mechanics (14 percent per annum) sit separately.
This separation aligns with the structure used in Corporate Tax under CD 75 of 2023. - The due date for payment continues to apply to Voluntary Disclosures and Tax Assessments, but the drafting now ties this directly to the TPL’s 20-business-day rule.
The 20-business-day rule remains, but the revised drafting reflects a more integrated approach: the violation refers to the “timeframe specified in the Tax Law,” and the Cabinet Decision only clarifies that, for Voluntary Disclosures and Assessments, the TPL defines their specific due dates.
This reinforces the centrality of the TPL as the source of procedural obligations.
Impact:
While the amount of the penalty is substantively reduced, the legal scope of the violation itself is now more streamlined, consistent and tied directly to the TPL. The shift from a detailed, prescriptive violation to a principle-based breach aligned with “timeframe specified in the Tax Law” provides greater coherence across VAT, Excise and CT. It also reduces interpretive disputes that arose under the 2021 wording regarding when liability crystallised, particularly in cases involving delayed Voluntary Disclosures, amended returns and corrected assessments.
Incorrect Tax Return and Voluntary Disclosure
| Aspect | 2021 Regime | 2025 Regime | Policy Shift |
| Incorrect return | 1,000 / 2,000 (min 500) | 500 flat unless corrected before deadline. | Simplification. |
| Voluntary disclosure on error | Tiered 5 – 40% based on age of error | 1% per month on Tax Difference until disclosure. | Predictable and aligned with Corporate Tax. |
| Failure to disclose before audit | 50% fixed + 4% monthly | 15% fixed + 1% monthly | Major relief and consistency with CD 75 of 2023. |
Facilitation of Tax Audit
Under the 2021 regime, the penalty was limited to the Person conducting Business failing to facilitate the Tax Auditor, with an Administrative Penalty of AED 20,000.
Under Cabinet Decision No. 129 of 2025, the scope of this violation has been significantly broadened. The penalty now applies to:
- the Person subject to Tax Audit,
- the Tax Agent, and
- the Legal Representative,
each of whom may independently incur the AED 20,000 penalty from their own funds, depending on who failed to provide the required facilitation. This reflects an expanded accountability framework that recognises the practical role that authorised representatives play in tax compliance and audit procedures.
While the amount of the penalty remains unchanged at AED 20,000, the potential exposure has increased materially. Multiple parties can now be penalised for the same obstructive conduct, and the Federal Tax Authority is no longer limited to assessing this penalty solely against the Taxable Person. This change underscores the Federal Tax Authority’s shift toward shared responsibility between Taxpayers and their appointed representatives during audit processes.
The Corporate Tax Dimension – Cabinet Decision No. 75 of 2023
Cabinet Decision No. 75 of 2023 introduced the first penalty table specific to the Corporate Tax Law, yet it mirrors the TPL framework in Cabinet Decision No. 129 of 2025 almost exactly:
| Parameter | Corporate Tax (2023) | VAT / Excise (2025) | Alignment |
| Late payment | 14% per annum | 14% per annum | Aligned |
| Voluntary Disclosure | 1% monthly | 1% monthly | Aligned |
| Failure to Disclose before Audit | 15% + 1% monthly | 15% + 1% monthly | Aligned |
| Failure to Submit Return | 500 / 1,000 per month (progressive) | 1,000 / 2,000 per event | Not Aligned* |
| Facilitation of Audit | 20,000 | 20,000 | Aligned |
*Corporate Tax uses a monthly accrual per month of delay, whereas VAT/Excise impose fixed event penalties for late return submission. Different mechanics, same underlying TPL concepts.
The 2025 Decision therefore seeks to harmonise Corporate Tax with the legacy VAT / Excise penalties, completing the integration of all federal taxes under one procedural logic. Corporate Tax continues to be governed separately under Cabinet Decision No. 75 of 2023, even though the underlying procedural rules derive from the same Tax Procedures Law.
Interrelationship Between Decisions 75 of 2023 and 129 of 2025
Cabinet Decision No. 129 of 2025 effectively extends the Corporate Tax penalty model introduced under Decision No. 75 of 2023 to all other federal taxes. This alignment demonstrates the policy goal of creating a single procedural and computational standard across VAT, Excise, and Corporate Tax. It ensures that penalties are calculated using the same monthly and percentage logic, regardless of the tax type, and that interpretation under the Tax Procedures Law remains consistent.
Interestingly, the Corporate Tax penalties have not been formally consolidated into Cabinet Decision No. 129 of 2025. Instead, Cabinet Decision No. 75 of 2023 remains a standalone instrument. This structural separation may reflect a deliberate policy choice to preserve flexibility for future Corporate Tax amendments or sector-specific reliefs, while still maintaining full procedural harmony through cross-reference to the same Tax Procedures Law. In practice, this means that although the legal instruments remain distinct, their substantive penalty mechanisms now operate as one unified system in both design and effect, even though they are set out in separate Cabinet Decisions.
Practical Implications Across the Tax Spectrum
- Tax Procedures Law:
- All penalties will use the same computational base and monthly-date rule.
- Federal Tax Authority systems can apply one interest engine across all taxes.
- VAT and Excise:
- Substantial penalty relief compared with the 2021 tables.
- Simplified structure reduces administrative disputes and appeal volume.
- Corporate Tax:
- The 2023 framework is now the benchmark; Cabinet Decision No. 129 of 2025 aligns others to it.
- Ensures fairness between new and existing registrants.
- Taxpayer Strategy:
- Greater certainty in penalty forecasting.
- Incentivises self-correction through a steady 1% monthly rate.
Policy Analysis: Why the Reversal?
1. A shift from deterrence to compliance enablement
The 2021 penalties were designed for a young VAT system with low compliance maturity.
By 2025, with Corporate Tax, digital invoicing, and e-filing maturity, enforcement can focus on correction rather than punishment.
2. Administrative simplicity
Tiered percentage tables proved difficult for automation and for Taxpayers to model.
A uniform 1% / 14% framework streamlines both audit assessment and Taxpayer systems.
3. Alignment with the Corporate Tax ecosystem
The introduction of Corporate Tax required a cross-tax penalty alignment to avoid divergent interpretations under a single Tax Procedures Law.
4. Transitional equity
The April 2026 effective date provides a 6-month window for Taxpayers to adjust accounting and ERP systems, mirroring the original 6-month buffer used in 2021.
Broader Strategic Implications
- Unified Compliance Framework:
- Businesses can now establish single penalty-accrual models across all tax heads, reducing compliance fragmentation.
- Federal Tax Authority Enforcement Consistency:
- Enforcement decisions and redeterminations can now rely on a single interpretive standard under the 2022 TPL.
- Dispute Management:
- The simplified formulas will reduce interpretational disputes before the Tax Dispute Resolution Committee and federal courts.
- Corporate Governance & Risk:
- Boards can more accurately provision for penalties and assess financial-statement exposure across group entities.
Operational Considerations for Businesses
- Align tax calendars to the 20 business day deadlines for payments and Voluntary Disclosures.
- Update compliance and internal-control policies to ensure consistent treatment across VAT, Excise, and Corporate Tax.
- Consider internal tax audits or self-reviews to identify exposure and prepare for the unified penalty application.
Conclusion
Cabinet Decision No. 129 of 2025 marks the next stage in the UAE’s journey from fragmented tax-specific penalties to a cohesive, system-wide Administrative Penalty framework effective from 14 April 2026.
It reverses the rigidity of 2021 penalties, embeds the principles of proportionality, and brings VAT, Excise, and Corporate Tax under a unified procedural logic aligned with the Tax Procedures Law (2022).
The next phase, beginning 14 April 2026, will test the applicability of this new regime. Businesses that recalibrate their compliance systems early, automate penalty calculations, and implement preventive review mechanisms will be best positioned to benefit from the UAE’s more balanced and predictable enforcement landscape.
This article refers to the English translation of Cabinet Decision No. 129 of 2025. The translation is non-official and published solely for reference purposes; the Arabic text of the Decision remains the legally binding version. The penalties discussed in this article relate solely to Administrative Penalties. These penalties do not concern tax evasion offences, which are treated separately under the Tax Procedures Law and carry criminal consequences beyond the scope of Administrative Penalties.
Looking Ahead
The moderation of penalties coincides with the expansion of the UAE’s digital tax environment, including e-invoicing, automated filings, and data-driven enforcement. Future policy developments are likely to focus on preventive compliance, real-time monitoring, and behavioural analytics. The Federal Tax Authority’s unified penalty framework provides the foundation for a modern compliance ecosystem where proportionality and digital oversight define the next phase of tax administration.
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For further information, please contact, Mohamed El Baghdady, Partner, Head of Tax and Financial Crimes, on mohamed.elbaghdady@habibalmulla.com.
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