UAE VAT penalties changed on 14 April 2026, when Cabinet Decision No. 129 of 2025 replaced the earlier penalty table. Some penalties stayed the same; the late payment penalty changed completely. Here's what applies now, and how to stay clear of all of them.
UAE VAT penalties at a glance
| Violation | Penalty |
|---|---|
| Late VAT registration | AED 10,000 |
| Late VAT return: first time | AED 1,000 |
| Late VAT return: repeat within 24 months | AED 2,000 |
| Late payment of VAT | 14% a year, charged monthly on the unpaid tax |
| Failure to keep required records | AED 10,000 (AED 20,000 for a repeat) |
Other penalties apply for things like incorrect returns, failing to update your registration details and problems found in an FTA audit. Check the FTA's published penalty table for the full list.
Late VAT registration: AED 10,000
You must apply for VAT registration within 30 days of crossing the AED 375,000 mandatory threshold. Miss it and the penalty is AED 10,000, and you may also have to pay the VAT you should have charged customers from the date you should have been registered, even if you never collected it.
Not sure if you've crossed the line? Read VAT Registration Threshold UAE: Who Must Register?
Late VAT return filing: AED 1,000 or AED 2,000
Returns are due by the 28th day after the end of each tax period. A late return costs AED 1,000 the first time and AED 2,000 for each repeat within 24 months. This applies to nil returns too. See our VAT return due date calendar.
Late VAT payment: 14% a year
This is the biggest change. Under the old rules, unpaid VAT attracted 2% on the due date and a further 4% for each month it stayed unpaid, up to 300% of the tax. From 14 April 2026, late payment is charged at 14% a year, calculated monthly on the tax still unpaid.
Example: AED 20,000 of VAT paid three months late costs about AED 20,000 × 14% ÷ 12 × 3 = AED 700 in late payment penalties. If the return was also filed late, add AED 1,000.
The new rate is far lower than the old system for long delays, but it keeps running every month until the tax is paid. Periods before 14 April 2026 may still fall under the earlier rules for part of the delay.
Record-keeping penalties
VAT-registered businesses must keep tax invoices, credit notes, import documents and accounting records, generally for at least five years. Failing to keep the required records can cost AED 10,000, rising to AED 20,000 for a repeat. Good monthly bookkeeping is the simplest protection.
Mistakes in a filed return
If you discover an error in a return you've already filed, you may need to submit a voluntary disclosure. Under the 2026 rules, the penalty for errors corrected by voluntary disclosure is based on how long the tax was underpaid, which rewards correcting mistakes quickly. Small errors can sometimes be corrected in your next return instead. Check the FTA's guidance or ask us before you file.
How to avoid VAT penalties
- Check your rolling 12-month turnover against the threshold every month.
- Put every return due date in your calendar and file a few days early.
- Pay the VAT due with the return, not after.
- Keep your books reconciled monthly so returns are quick and accurate.
- Fix errors as soon as you find them.
Already behind? Our catch-up bookkeeping service brings your books and returns up to date in order.
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