UAE Cabinet Decision No. 129 of 2025: Tax Administrative Penalties

UAE Issues Cabinet Decision No. 129 of 2025 Updating Administrative Penalties for Tax Violations

The UAE Ministry of Finance has issued Cabinet Decision No. 129 of 2025, updating the framework governing administrative penalties for violations of UAE Tax Laws. This new Decision replaces the penalty tables previously set out under Cabinet Decision No. 40 of 2017 (as amended by Decisions 49 and 108 of 2021) and will take effect on 14 April 2026.

The update introduces a revised structure for penalties under the Federal Tax Procedures Law, VAT Law, and Excise Tax Law, with changes affecting compliance obligations, penalty calculations, and certain penalty rates.

Below is a summary of the key updates relevant to taxpayers.

1. Overall Framework Update

Cabinet Decision No. 129 of 2025:

• Fully replaces the previous administrative penalty tables
• Introduces restructured penalty mechanisms, particularly for late payment and voluntary disclosure
• Maintains the UAE Federal Tax Authority’s enforcement authority while refining calculation methods and penalty thresholds

2. Key Changes to Tax Procedures Penalties

(a) Record Keeping and Compliance Documentation

• Penalties remain in principle similar but are now structured as:
  • AED 10,000 per violation, or
  • AED 20,000 for repeated violations within 24 months

This reinforces the importance of maintaining complete and accurate accounting and tax records.

(b) Submission of Arabic Documentation

• Penalty reduced significantly from AED 20,000 to AED 5,000

This reflects a more proportionate approach to administrative compliance requirements.

(c) Tax Registration and Deregistration

• Registration failure remains at AED 10,000
• Deregistration delay continues at AED 1,000 per month (up to AED 10,000)

No material change in these obligations.

(d) Updates to Taxpayer Information

• Revised structure:
  • AED 1,000 for first violation
  • AED 5,000 for repeated violations within 24 months

3. Major Change: Late Payment Penalties

One of the most significant updates relates to late payment penalties, which have been restructured:

Previous framework:

• 2% immediately after the due date
• 4% monthly thereafter
• Subject to overall cap (300%)

New framework:

• A 14% annualized penalty rate applied monthly (or part thereof)

This represents a shift toward a more standardized calculation method while maintaining strict enforcement for delayed payments.

4. Voluntary Disclosure Penalties

The new Decision introduces a revised approach:

Previous system:

• Tiered penalties ranging from 5% to 40%, depending on timing

New system:

• 1% per month of the tax difference
• Applies continuously from the due date until disclosure submission

This change emphasizes early correction of errors and encourages timely voluntary compliance.

Comparative Summary Table

5. Effective Date

• The Decision becomes effective on 14 April 2026

6. Key Takeaways for Businesses

Taxpayers in the UAE should consider the following actions:

• Review internal tax compliance and reporting processes
• Ensure timely VAT returns and payments to avoid revised late payment penalties
• Strengthen voluntary disclosure procedures to benefit from reduced exposure
• Update compliance policies in line with the new penalty structure

Conclusion

Cabinet Decision No. 129 of 2025 reflects the UAE’s continued efforts to enhance tax compliance clarity, modernize penalty mechanisms, and promote timely disclosure while maintaining strong enforcement standards.

Businesses are encouraged to assess the impact of these changes well ahead of the effective date to ensure full compliance readiness.