FTA penalties in UAE are enforced by the Federal Tax Authority. VAT and Excise penalties are governed by Cabinet Decision No. 40 of 2017 as amended by Cabinet Decision No. 129 of 2025 (effective 14 April 2026). Corporate tax penalties are governed separately by Cabinet Decision No. 75 of 2023. Unlike many tax systems globally, the UAE FTA does not issue warnings before imposing fines — penalties are applied automatically the moment a deadline is missed or a violation is detected. This guide contains every material penalty category for 2026, with exact amounts, the escalation mechanics, and the appeal process that can reduce or eliminate fines.
Complete FTA Penalty List UAE 2026 — VAT Violations
| Violation | Penalty Amount | Severity |
|---|---|---|
| Failure to register for VAT (mandatory threshold exceeded) | AED 10,000 | CRITICAL |
| Late VAT return filing — first offense | AED 1,000 | MEDIUM |
| Late VAT return filing — second offense within 24 months | AED 2,000 | HIGH |
| Late payment of VAT — from day after due date until paid in full | 14% per annum, calculated monthly (~1.17%/month) | HIGH |
| Failure to apply for VAT deregistration when required | AED 10,000 | HIGH |
| Issuing non-compliant tax invoices (missing required fields) | AED 2,500 per invoice | HIGH |
| Issuing a tax invoice without a valid TRN | AED 2,500 per invoice | HIGH |
| Failure to issue a VAT credit note when required | AED 2,500 per note | HIGH |
| Failure to display prices inclusive of VAT | AED 5,000 | HIGH |
| Underpayment of VAT due to error (FTA-discovered) | 15% of unpaid tax (fixed) + 1%/month from date error arose | CRITICAL |
| Claiming a false VAT refund | 100% of false refund claimed | CRITICAL |
FTA Penalties UAE 2026 — Corporate Tax Violations
| Violation | Penalty Amount | Severity |
|---|---|---|
| Failure to register for corporate tax by FTA deadline | AED 10,000 | CRITICAL |
| Late filing of corporate tax return — months 1 to 12 | AED 500 / month | HIGH |
| Late filing of corporate tax return — month 13 onwards | AED 1,000 / month | CRITICAL |
| Late payment of corporate tax — from day after due date until paid in full | 14% per annum, calculated monthly (~1.17%/month) | HIGH |
| Underpayment of corporate tax due to error (FTA-discovered) | 15% of underpaid tax (fixed) + 1%/month from date error arose | CRITICAL |
FTA Penalties UAE 2026 — Record-Keeping & General Violations
| Violation | Penalty Amount | Severity |
|---|---|---|
| Failure to maintain accounting records — first offense | AED 10,000 | HIGH |
| Failure to maintain accounting records — repeat offense | AED 20,000 | CRITICAL |
| Failure to submit records in Arabic when requested by FTA | AED 5,000 | HIGH |
| Failure to cooperate with FTA auditor | AED 20,000 | HIGH |
| Failure to inform FTA of changes to business details | AED 1,000 (first) / AED 5,000 (repeat) | MEDIUM |
| Voluntary disclosure penalty — self-reported error | 1% per month on tax difference (from date error arose) | HIGH |
| FTA-discovered error (no voluntary disclosure) | 15% of tax difference (fixed) + 1%/month from date error arose | CRITICAL |
| Tax evasion (criminal) | 1x – 5x evaded amount + prosecution | CRIMINAL |
How FTA Penalty Escalation Works — The Compounding Problem
Under Cabinet Decision No. 129 of 2025 (effective 14 April 2026), late payment now accrues at 14% per annum, calculated monthly. While this is a significant reduction from the previous 1%/day structure, the penalty still compounds month-on-month on large unpaid balances. Example:
- Business misses Q2 2026 VAT return due 28 July 2026
- Unpaid VAT: AED 80,000
- Late filing penalty (first offence): AED 1,000
- Month 1 late payment (14% ÷ 12 × AED 80,000): AED 933
- Month 2 late payment: AED 933
- Month 3 late payment: AED 933
- Total penalties by Day 90: approximately AED 3,800 on an AED 80,000 tax bill
This is a fraction of the AED 72,000+ that would have accrued under the old 1%/day structure. However, a 6-month delay on a large liability still generates material penalties — and the underlying VAT debt remains. Early resolution remains the right strategy.
How to Appeal an FTA Penalty in UAE — The Reconsideration Process
If you have received an FTA penalty in the UAE, you have a formal legal right to challenge it through the Reconsideration process. Success rates are highest when: the error was a first-time offense, there is a genuine technical or procedural reason for the delay, or the penalty amount is disproportionate to the violation.
Receive the FTA Penalty Notice
The FTA issues a penalty decision via EmaraTax and by email. Note the exact penalty code, amount, tax period, and the issue date — you have 40 business days from this date to submit a Reconsideration Request. Do not miss this window.
Prepare the Reconsideration Request
Draft a formal Reconsideration Request explaining why the penalty should be reduced or waived. Include supporting documentation: proof of filing attempts, system errors, medical certificates, or other genuine evidence. Generic requests with no supporting evidence are routinely rejected.
Submit via EmaraTax
The Reconsideration Request is submitted through the FTA EmaraTax portal under the Correspondence section. Include all supporting documents as PDF attachments. Retain the submission reference number.
Await FTA Decision (20-40 Business Days)
The FTA reviews the request and issues a Reconsideration Decision. The possible outcomes are: full penalty waiver, partial reduction, or rejection. You will receive the decision via EmaraTax and email.
Escalate to TDRC if Rejected
If the Reconsideration Request is rejected, you can escalate to the Tax Disputes Resolution Committee (TDRC) within 40 business days of the FTA's rejection decision. The TDRC is an independent body that reviews appeals from both taxpayers and the FTA. TDRC decisions can be further appealed to the Federal Court.
Voluntary Disclosure — Correct Errors Before the FTA Finds Them
If you have made an error on a previously submitted VAT or corporate tax return — whether by over-claiming input tax, under-declaring output tax, or incorrectly applying zero-rating — you can submit a Voluntary Disclosure through EmaraTax to correct the record. The penalty structure applies under Cabinet Decision No. 129 of 2025 (VAT, effective 14 April 2026) and Cabinet Decision No. 75 of 2023 (corporate tax):
- Voluntary Disclosure penalty: 1% per month on the tax difference, calculated from the date the error arose until the disclosure is filed
- FTA-discovered error penalty: 15% fixed + 1% per month — the 15% fixed charge alone makes FTA discovery significantly more expensive than proactive disclosure
If the FTA launches an audit of your business and discovers an error that you were aware of but did not disclose, you pay the higher rate and your credibility with the FTA is damaged. Voluntary Disclosure is always the right call when an error is identified.
How to Avoid FTA Penalties — Preventive Checklist
- Register for VAT as soon as your taxable supplies approach AED 375,000 in the trailing 12 months — do not wait until you breach the threshold.
- Register for corporate tax if you have not already done so — the AED 10,000 penalty for late registration is enforced.
- File every VAT return by the 28th — even if it is a nil return.
- Pay all VAT and corporate tax filing amounts owed on or before the filing deadline — late payment accrues at 14% per annum (monthly) from day 1 after the due date.
- Issue compliant tax invoices — every invoice must include TRN, date, sequential number, description, quantity, rate, VAT amount, and total.
- Keep all records for 5 years (15 years for real estate transactions) and be able to produce them in Arabic on FTA request.
- Notify the FTA of any changes to business details — address, activities, shareholders — within 20 business days of the change.
- Submit Voluntary Disclosures promptly when errors are discovered — before the FTA initiates an audit.
Frequently Asked Questions — FTA Penalties UAE 2026
The FTA charges AED 1,000 for a first-time late VAT filing, rising to AED 2,000 for a second offense within 24 months. If VAT is also unpaid, late payment accrues at 14% per annum, calculated monthly (~1.17%/month), from the day after the due date until paid in full (Cabinet Decision No. 129 of 2025, effective 14 April 2026).
Failure to register for VAT when required (taxable supplies exceeding AED 375,000 in 12 months) carries a fixed penalty of AED 10,000 (reduced from AED 20,000 under Cabinet Decision No. 129 of 2025, effective 14 April 2026).
The FTA imposes a fixed penalty of AED 10,000 for failure to register for corporate tax by the applicable deadline. Late filing of corporate tax returns incurs AED 500 per month for the first 12 months, then AED 1,000 per month thereafter.
Yes. You can submit a Reconsideration Request to the FTA within 40 business days of receiving a penalty notice. If rejected, you can escalate to the Tax Disputes Resolution Committee (TDRC). Successful appeals result in full or partial penalty waiver.
Issuing a tax invoice without meeting all required fields carries a penalty of AED 2,500 per non-compliant invoice (reduced from AED 5,000 under Cabinet Decision No. 129 of 2025, effective 14 April 2026). Required fields include TRN, invoice date, sequential invoice number, description, quantity, unit price, VAT rate, and total amount including VAT.
Submitting a voluntary disclosure carries a penalty of 1% per month on the tax difference, from the date the error arose until the disclosure is filed (VAT: Cabinet Decision No. 129 of 2025, effective 14 April 2026; corporate tax: Cabinet Decision No. 75 of 2023). If the FTA discovers the error first, the penalty is 15% fixed plus 1% per month — making voluntary disclosure significantly cheaper.
Failure to maintain adequate tax records carries AED 10,000 for a first offense, rising to AED 20,000 for subsequent offenses within 24 months. Records must be kept for 5 years (15 years for real estate) and be available in Arabic upon FTA request.
Unpaid FTA penalties can result in bank account attachment orders, asset seizure, TRN suspension, and debarment from government contracts. Always engage a tax professional to manage penalty disputes before enforcement action begins.
Submit a Reconsideration Request via EmaraTax within 40 business days of the penalty notice, with supporting evidence. The FTA reviews within 20-40 business days. If rejected, escalate to the Tax Disputes Resolution Committee (TDRC) within 40 business days of rejection.
Late filing of a UAE corporate tax return carries AED 500 per month for months 1-12, then AED 1,000 per month from month 13 onwards. These penalties compound monthly and are separate from any late payment penalties.
