UAE revises tax penalties: 5 changes businesses must know

Dubai: The UAE has introduced sweeping changes to tax penalties, cutting fines and revising how violations are handled, with the Federal Tax Authority positioning the move as a step towards easing compliance and encouraging businesses to correct past errors.

The amendments, now in force, revise administrative penalties linked to VAT, excise tax and broader tax procedures, with several fines reduced and calculation methods adjusted.

The changes come at a time when businesses are navigating tighter reporting requirements, with the updated framework aimed at lowering the cost of compliance while pushing for more timely disclosures.

The revisions touch multiple areas of tax compliance, from record keeping to voluntary disclosures, with a clear focus on reducing penalties while increasing accountability.

Several fines have been reduced sharply, particularly for procedural breaches that businesses encounter regularly.

The penalty for failing to submit tax-related records in Arabic when requested has been cut from Dh20,000 to Dh5,000, while fines linked to delays in updating tax records have also been lowered.

The Federal Tax Authority said the reductions are designed to ease the burden on businesses while maintaining compliance standards.

“The new amendment, which includes reductions in a number of administrative penalties imposed for violations of tax laws, comes within the framework of the wise leadership’s directives to implement the tax system in accordance with international best practices,” said Abdulaziz Mohammed Al Mulla, Director General of the Federal Tax Authority.

The updated framework introduces a more structured approach to repeat offences, replacing higher flat penalties with a tiered system.

Businesses that fail to update their tax records now face Dh1,000 per violation, rising to Dh5,000 if the same issue is repeated within 24 months, replacing earlier penalties of Dh5,000 and Dh10,000.

The change brings more predictability to penalty exposure while encouraging timely updates.

Penalties imposed on legal representatives have also been revised, reducing the fine for failing to notify the Authority of their appointment from Dh10,000 to Dh1,000.

The liability remains with the representative, payable from their own funds, reinforcing accountability while lowering financial exposure.

The Authority has placed greater emphasis on voluntary compliance, encouraging businesses to correct errors before audits.

The amendments reduce the financial impact of disclosures linked to incorrect tax returns, delayed submissions and refund claims, provided businesses act before being notified of an audit.

“We call on tax registrants, where violations of tax legislation exist, to benefit from the significant advantages provided by the Decision, which introduces further facilitations aimed at reducing the tax burden on business sectors,” Al Mulla said.

The updated rules extend to multiple areas, including late tax payments, incorrect filings, and failures to account for tax on behalf of others where required.

The Authority said the broader intent is to support businesses in regularising their tax positions while improving transparency across the system.

“They also encourage registrants to notify the Authority of any cases that may require amendments to the information contained in their tax records and further encourage the prompt submission of voluntary disclosures, where required, without exposure to significant financial penalties,” Al Mulla added.