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UAE tax penalties in 2026: the full list and how to remove them

In 2026 the UAE penalty system became gentler on those who fix their own mistakes and harsher on those who wait for an audit. Late payment interest was rewritten in April, and the automatic waiver of the corporate tax late-registration penalty is still running. Below are the amounts for every major breach — and which of them can realistically be removed.

Updated 13 August 2026 · AVANGARD GROUP · accounting and tax in the UAE · Author: Svetlana Pavelchuk, CEO of AVANGARD GROUP

Late registration: AED 10,000
Corporate tax return: AED 500 per month
Unpaid tax: 14% per annum
Penalty waiver: possible

Corporate tax

Breach	Penalty
Late submission of a registration application	AED 10,000
Late filing of a tax return	AED 500 for each month (or part of a month) for the first 12 months, AED 1,000 per month thereafter
Late payment of tax	14% per annum, accrued monthly on the unpaid amount
Failure to keep the required records	AED 10,000, or AED 20,000 on repetition within 24 months
Failure to notify changes to taxpayer details	AED 1,000, or AED 5,000 on repetition within 24 months

Note how the return penalty is built: it accrues for every month started. One day late costs the same as a full month, and a return forgotten for a year turns into AED 6,000 and keeps growing. Deadlines and filing mechanics are covered in our corporate tax guide.

VAT

Breach	Penalty
Late VAT registration	AED 10,000
Late filing of a return	AED 1,000 first time, AED 2,000 on repetition within 24 months
Late payment of tax	14% per annum, charged monthly, no compounding
Voluntary disclosure before an audit notice	1% per month of the underpaid amount
The same error found during an FTA audit	15% fixed + 1% per month

The new regime was introduced by Cabinet Decision No. 129 of 2025 and applies from 14 April 2026. Before that date the scheme was "2% immediately, then 4% per month, capped at 300%" — under which debts grew far faster. The detail and return deadlines are in our VAT guide.

The arithmetic that defines the new system. The gap between 1% per month on a voluntary disclosure and 15% plus 1% on an audit assessment is the price of waiting. Finding your own mistake before the tax authority does has become materially cheaper than hoping it goes unnoticed.

Which penalties can be removed

Automatic waiver of the corporate tax late-registration penalty

This is the mechanism that actually works. If a taxpayer files their first tax return within 7 months of the end of their first tax period, the AED 10,000 penalty is cancelled automatically, and any amount already paid is credited back to the tax account. No application is required. By mid-2026 more than 68,600 taxpayers had benefited from it.

One important detail: the seven-month window is shorter than the ordinary nine-month filing deadline. Waiting until the last day of the standard deadline means the waiver no longer applies.

Reconsideration request

If you believe a penalty is unfounded, you can file a reconsideration request with the FTA. This is not a plea for leniency but an appeal on the merits: it needs documents showing that there was no breach, or that it was caused by circumstances beyond your control.

Waiver for justified circumstances

A separate mechanism covers cases where the breach was caused by serious illness or the death of the taxpayer or a key employee, by restrictions, by technical system failures and similar circumstances. Evidence is required and each case is decided individually.

What the waiver mechanisms do not cover. "I did not know", "the accountant left" and "the company was dormant" are not grounds. The obligation to register and file does not depend on having any turnover — and that is the most common reason new companies get penalised.

Five situations that generate most penalties

The company is registered but not trading. FTA registration and the annual return are mandatory at zero turnover and at a loss. That is AED 10,000 plus monthly filing penalties.
The VAT threshold was crossed unnoticed. Turnover is measured over a rolling 12 months, not a calendar year: you can cross it mid-year, and the 30-day application clock starts at that moment.
The first return of a new company is forgotten. The first tax period often does not match the calendar year — the deadlines run from the date in the incorporation documents.
Records are not kept, or kept partially. A standalone breach with its own penalty from AED 10,000, regardless of whether the tax was calculated correctly.
Changes to the company were not reported to the FTA. A new address, a change of shareholders or of activities — all of it has to be updated in the tax profile.

What to do if a penalty has already been charged

Do not wait. Interest on unpaid tax keeps accruing monthly, and the return penalty grows with every month started.
Check whether the automatic waiver applies. If it is corporate tax late registration and your first tax period ended recently, count the seven-month window.
File the return, even late. An unfiled return is a growing amount; filing it fixes the ceiling.
Review earlier periods before an audit. A voluntary disclosure costs 1% per month; the same error found by an inspector costs 15% plus 1%.
Collect the documents for a reconsideration. Where there are grounds, the request is filed with evidence, not with explanations.

How we help

We check whether you are registered where you are required to be, calculate the deadlines for your tax period, prepare and file the returns, and keep the books so that documents are in place before — not after — the FTA asks for them. If a penalty has already arrived, we assess whether it is removed automatically and prepare a reconsideration request where there are grounds for one.

Free penalty risk review

We will look at your registrations, filing deadlines and earlier periods, and tell you whether any penalties have been charged and whether they can be removed. The review takes one working day.

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Frequently asked questions

AED 10,000. The penalty does not depend on the amount of profit and applies even to a company with no turnover. It can be removed: if you file your first tax return within 7 months of the end of your first tax period, the FTA cancels the penalty automatically and credits any amount paid back to your tax account.

AED 500 for each month or part of a month during the first twelve months of delay, and AED 1,000 per month from the thirteenth month onwards. The penalty accrues for every month started, so being a few days late costs the same as a full month.

14% per annum, charged monthly on the unpaid amount with no compounding. The regime was introduced by Cabinet Decision No. 129 of 2025 and applies from 14 April 2026. The previous scheme was harsher: 2% immediately, then 4% per month, capped at 300% of the tax.

Yes, in three ways. Automatically — for the corporate tax late-registration penalty, if the first return is filed within the seven-month window. Through a reconsideration request — if there was no breach, or it was caused by circumstances beyond your control, supported by documents. Through the waiver for justified circumstances — serious illness, the death of the taxpayer or a key employee, or system failures.

To fix it yourself. A voluntary disclosure filed before an audit notice costs 1% per month of the underpaid amount. The same error found by an FTA inspector costs 15% fixed plus 1% per month, on top of late payment interest.

Yes. The obligation to register with the FTA and file an annual return does not depend on having any turnover or profit. A dormant company with zero revenue collects both the late registration penalty and the monthly penalties for unfiled returns.

This material is for general information only and is not tax advice. The data is current as of 13 August 2026. Administrative penalty amounts are set by Cabinet decisions and are revised periodically — 2026 alone brought a complete rewrite of the late payment interest regime. Please confirm current amounts and waiver conditions with the Federal Tax Authority at tax.gov.ae or with us. Whether a particular penalty applies depends on your company's circumstances.