UAE Cuts Tax Penalties in Major Compliance Reform

UAE, 28 April, 2026: The Federal Tax Authority has introduced major revisions to administrative tax penalties, reducing fines and updating enforcement rules across VAT, excise tax, and other tax procedures.

The changes aim to ease compliance costs, encourage voluntary disclosures, and help businesses correct past errors without heavy financial penalties.

Key Changes Include:

• Lower fines for common violations – Penalties for failing to provide tax records in Arabic when requested have been reduced from AED 20,000 to AED 5,000.
• New repeat violation system – Failure to update tax records now carries AED 1,000 for the first offence and AED 5,000 for repeated breaches within 24 months.
• Relief for legal representatives – Penalties for failing to notify appointment as a legal representative have been reduced from AED 10,000 to AED 1,000.
• Encouragement for voluntary disclosures – Reduced penalties apply where businesses proactively correct errors before audits.
• Wider coverage – The rules also apply to late tax payments, incorrect filings, and tax accountability failures.

Abdulaziz Mohammed Al Mulla said the amendments support voluntary compliance and align the UAE tax system with international best practices.