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UAE VAT Fundamentals/Module 7: Penalties & Compliance
5 min

Administrative Penalties — The Framework

Cabinet Decision No. 49 of 2021 establishes the penalty framework for VAT violations including late filing, late payment, and record keeping failures.

The Penalty Framework

Cabinet Decision No. 49 of 2021 (as amended) establishes the administrative penalty framework for VAT violations in the UAE.

Late Filing Penalties

  • First late filing: AED 1,000 fixed penalty
  • Repeated late filing within 24 months: AED 2,000 fixed penalty
  • Plus percentage-based penalties on unpaid tax

Late Payment Penalties

If VAT is not paid by the deadline (28th of the month following the tax period):

  • 2% of unpaid tax immediately after the deadline
  • 4% of unpaid tax on the 7th day after the deadline
  • 1% daily penalty from the 8th day onward (up to 300% maximum)

Other Key Penalties

| Violation | Penalty | |---|---| | Failure to issue tax invoice | AED 2,500 | | Failure to issue tax credit note | AED 2,500 | | Failure to maintain records | AED 2,500 (first), AED 5,000 (repeated) | | Failure to display VAT-inclusive prices | AED 2,500 | | Failure to notify FTA of changes | AED 2,500 | | Failure to register | AED 10,000 | | Failure to deregister | AED 10,000 |

Penalty Redetermination

Under Cabinet Decision No. 49 of 2021, taxpayers may apply for penalty redetermination based on:

  • Voluntary disclosure of errors before FTA discovery
  • Cooperation with FTA audits
  • Implementation of corrective measures

The FTA may reduce or waive penalties where the taxpayer has taken prompt corrective action.

Practical UAE example

**Sharjah Trading Company**: A company files its Q1 VAT return showing AED 30,000 due but fails to pay by the 28th. On the 29th, 2% penalty applies (AED 600). If still unpaid by the 7th day (4th of next month), 4% applies (AED 1,200). From the 8th day, 1% daily applies (AED 300/day). If paid on the 20th day late: total penalties = AED 600 + AED 600 + (12 × AED 300) = AED 4,800, in addition to the AED 30,000 original tax liability.

Key takeaways

  • Late filing: AED 1,000 first, AED 2,000 repeated within 24 months.
  • Late payment: 2% immediately, 4% on day 7, 1% daily from day 8 (max 300%).
  • Other penalties range from AED 2,500 to AED 10,000.
  • Penalty redetermination available for voluntary disclosure and cooperation.

Authoritative sources

Federal Decree-Law No. 8 of 2017 on Value Added Tax

United Arab Emirates — Federal Tax Authority · The VAT Law — Articles 1 to 82 (as amended by Federal Decree-Law No. 18 of 2022)

Effective: 1 Jan 2018Verified: 5 Oct 2026View source

Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on VAT

United Arab Emirates — Cabinet / Federal Tax Authority · Executive Regulations (as amended by Cabinet Decisions No. 46/2020, 24/2021, 88/2021, 99/2022, 100/2024, and 100/2025)

Effective: 1 Jan 2018Verified: 5 Oct 2026View source

Cabinet Decision No. 49 of 2021 on Administrative Penalties for Violations of Tax Laws

UAE Federal Tax Authority · Administrative penalty framework — late filing, late payment, record keeping, and redetermination

Effective: 28 Apr 2021View source
Knowledge check

1. What is the fixed penalty for a first-time late VAT return filing?

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This lesson is general educational content, not individualized tax or legal advice. Always consult a qualified professional for your specific situation.