Published 14 September 2026 | By Tax Falcon UAE — FTA-Approved Tax Advisors (Reg. No. 20056800)
The UAE’s Federal Tax Authority (FTA) has significantly reformed its penalty framework in 2026. With Cabinet Decision No. 129 of 2025 taking effect on 14 April 2026, the administrative penalty regime for corporate tax, VAT, and excise tax violations has been restructured.
If you operate a business in the UAE, understanding these FTA penalties is critical for maintaining tax compliance.
What Are FTA Penalties in the UAE?
FTA penalties are administrative fines imposed by the Federal Tax Authority on businesses and individuals who fail to comply with their obligations under UAE tax law. These penalties apply across corporate tax, VAT, and excise tax.
The penalty framework was originally established under Cabinet Decision No. 40 of 2017 for VAT and excise, with corporate tax penalties added following the introduction of corporate tax in June 2023.
In 2026, Cabinet Decision No. 129 of 2025 brought a major overhaul that unified and restructured the penalty regime, effective 14 April 2026.
One of the key changes is the late payment penalty, which has been reformed to 14% per annum, replacing the previous monthly percentage model.
Who Does This Apply To?
FTA penalties apply to every taxable person in the UAE, including:
Corporate Tax Registrants:
All juridical persons incorporated or managed in the UAE are subject to corporate tax. This includes mainland LLCs, free zone entities, branches of foreign companies, and qualifying natural persons carrying out business activities.
VAT Registrants:
Businesses with taxable supplies exceeding AED 375,000 must register for VAT. Businesses between AED 187,500 and AED 375,000 may register voluntarily.
Excise Tax Registrants:
Businesses dealing in excisable goods such as tobacco, carbonated drinks, and energy drinks.
If your business is registered — or should be registered — with the FTA for any of these taxes, understanding the applicable penalties is essential.
Key FTA Penalty Amounts in 2026
Corporate Tax Penalties
| Violation | Penalty Amount |
|---|---|
| Late CT registration | AED 10,000 |
| Late CT return filing – first 12 months | AED 500 per month |
| Late CT return filing – after 12 months | AED 1,000 per month |
| Late CT payment | 14% per annum on outstanding amount |
| Failure to maintain records | AED 10,000 first offence; AED 20,000 repeat |
| Failure to submit information/documents to FTA | AED 5,000 first offence; AED 10,000 repeat |
VAT Penalties
| Violation | Penalty Amount |
|---|---|
| Late VAT registration | AED 10,000 |
| Late VAT return filing | AED 1,000 first offence; AED 2,000 repeat |
| Late VAT payment | 14% per annum on outstanding amount |
| Failure to issue tax invoice | AED 5,000 per invoice first offence; AED 10,000 repeat |
| Incorrect tax return | AED 1,000 first offence; AED 2,000 repeat |
| Failure to inform FTA of amendments | AED 5,000 first offence; AED 10,000 repeat |
The article states that VAT returns are due by the 28th day after each tax period ends, while corporate tax returns must be filed within 9 months of the end of the tax period.
Voluntary Disclosure Penalties
If you discover an error in a previously filed return, submitting a voluntary disclosure to the FTA is important.
Under the new framework, penalties for voluntary disclosures have been restructured to encourage self-correction. Failing to submit a voluntary disclosure when an error is discovered and being caught during an FTA audit can result in significantly higher penalties.
How to Dispute an FTA Penalty
If you believe an FTA penalty has been imposed incorrectly, or if mitigating circumstances exist, UAE tax law provides a three-tier dispute process.
Step 1: Reconsideration Request to the FTA
The first step is to submit a formal reconsideration request directly to the FTA.
The request must be submitted within 40 business days from the date the penalty decision was communicated. It is submitted through the EmaraTax portal with supporting documents explaining why the penalty should be reduced or waived.
Step 2: Objection to the TDRC
If the FTA rejects the reconsideration request, or you disagree with its revised decision, you can escalate the matter to the Tax Disputes Resolution Committee (TDRC).
You have 40 business days from the FTA’s reconsideration decision to file the objection.
Step 3: Court Appeal
If you remain unsatisfied with the TDRC’s decision, you can appeal to the competent court within 40 business days of the TDRC decision.
The article emphasizes that the 40-business-day deadlines are strict, so businesses should act promptly after receiving a penalty notice.
Common Mistakes to Avoid
1. Missing the Registration Deadline
Many businesses, particularly free zone entities, may assume they do not need corporate tax registration. Late registration can result in a AED 10,000 penalty.
2. Underestimating the 14% Late Payment Penalty
Under the new framework, late payment is calculated at 14% per annum on the outstanding tax amount.
3. Filing Late
Late filing can trigger the applicable monthly penalty, so businesses should not wait until after the deadline.
4. Ignoring Voluntary Disclosure Obligations
If you discover an error in a filed return, addressing it proactively can help reduce potential exposure.
5. Missing the 40-Business-Day Reconsideration Window
Businesses should not delay after receiving a penalty notice because missing the deadline can affect their ability to challenge the penalty.
6. Not Maintaining Proper Records
The FTA requires businesses to maintain financial records and supporting documents for the required period. Failure to produce records during an FTA audit can result in additional penalties.
How Tax Falcon Can Help
At Tax Falcon UAE, FTA-approved tax advisors specialise in penalty management across corporate tax and VAT.
Our services include:
- Penalty risk assessment
- FTA reconsideration applications
- TDRC objections
- Corporate tax return filing
- VAT filing and registration
- Proactive tax compliance
If you have received an FTA penalty notice or are concerned about compliance gaps, our team can help you understand your options and take the appropriate next steps.
Frequently Asked Questions
What is the penalty for late corporate tax registration in UAE?
The penalty for late corporate tax registration is AED 10,000 according to the article.
How much is the late payment penalty for corporate tax in UAE in 2026?
Under Cabinet Decision No. 129 of 2025, effective 14 April 2026, the late payment penalty is 14% per annum on the outstanding tax amount.
Can FTA penalties be waived or reduced?
Yes. The article states that the FTA has authority to reduce or waive penalties in certain circumstances. The formal process involves submitting a reconsideration request within 40 business days.
What is the difference between FTA reconsideration and TDRC objection?
FTA reconsideration is the first-level review by the FTA itself. TDRC objection is the second-level review by the Tax Disputes Resolution Committee.
What happens if I miss the September 30 corporate tax filing deadline?
According to the article, late filing can result in a AED 500 per month penalty for the first 12 months, increasing to AED 1,000 per month thereafter, along with applicable late-payment penalties on unpaid tax.
Don’t Let FTA Penalties Catch You Off Guard
Whether you need help before the 30 September 2026 deadline, want to dispute an existing penalty, or need a compliance health check, Tax Falcon’s FTA-approved advisors are available to assist.
Phone: +971 56 973 0073
Email: support@taxfalconuae.com
Website: taxfalconuae.com
Office: Level 1, Yas Mall, Yas Island, Abu Dhabi
This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional for advice specific to your situation.