The FTA administrative penalty framework
Administrative penalties for both VAT and Corporate Tax are set out in Cabinet Decision 49 of 2021 on Administrative Penalties for Violation of Tax Laws (as amended for Corporate Tax by Cabinet Decision 75 of 2023). Penalties fall into two broad categories: fixed-amount penalties (e.g. late registration) and percentage/time-based penalties (e.g. unpaid tax accruing interest-like monthly charges).
Penalties are payable from your own funds and are not deductible for Corporate Tax purposes. Many businesses in the UAE only discover overdue penalties when trying to renew a trade licence or apply for a VAT refund. Use our FTA Penalty Calculator to check your exposure before it grows.
Late Corporate Tax registration — AED 10,000
Every taxable person, including free zone entities and small businesses, must register for Corporate Tax on EmaraTax within the deadline linked to their trade licence issuance month. Failure to submit the registration application within the specified timeframe results in a fixed AED 10,000 penalty, regardless of whether the business ultimately owes any tax (including businesses that would qualify for Small Business Relief).
This is a one-time fixed penalty per late registration, not a monthly accruing charge. Register promptly through our Corporate Tax registration service for AED 799 to avoid it entirely.
Late Corporate Tax return filing — AED 500/month then AED 1,000/month
The Corporate Tax return must be filed within 9 months of the end of the relevant tax period. For a business with a 31 December 2025 year-end, the return is due by 30 September 2026. Late filing incurs AED 500 per month (or part thereof) for the first 12 months of delay, rising to AED 1,000 per month for each month beyond the first 12 months of continued non-filing.
| Months late | Monthly penalty rate | Cumulative penalty |
|---|---|---|
| Month 1 | AED 500 | AED 500 |
| Month 6 | AED 500 | AED 3,000 |
| Month 12 | AED 500 | AED 6,000 |
| Month 13 | AED 1,000 | AED 7,000 |
| Month 18 | AED 1,000 | AED 12,000 |
File on time with our Corporate Tax filing service, from AED 999*, to avoid this escalating monthly charge.
Unpaid Corporate Tax — 14% per annum, monthly accrual
Any Corporate Tax that remains unpaid after the due date accrues a penalty of 14% per annum, calculated and charged on a monthly basis on the outstanding amount, starting from the day after the payment due date and continuing until the full amount is settled. This is separate from, and in addition to, the late filing penalty.
For example, AED 100,000 of unpaid Corporate Tax accrues approximately AED 1,167 per month (14% ÷ 12), meaning a 6-month delay adds roughly AED 7,000 in penalties on top of the original AED 100,000 liability.
Late VAT registration — AED 10,000
Businesses that exceed the AED 375,000 mandatory VAT registration threshold (or AED 187,500 voluntary threshold, if choosing to register early) must register within 30 days of becoming liable. Failing to submit the VAT registration application on time results in a fixed AED 10,000 penalty, applied once per late registration event.
Our VAT registration service is AED 799 and completed 100% online, with confirmation typically within a few business days once documents are submitted.
Late VAT return filing — AED 1,000 first, AED 2,000 repeat
VAT returns must be filed within 28 days of the end of the tax period. A late VAT return incurs a fixed AED 1,000 penalty for the first occurrence. If the same violation is repeated within 24 months, the penalty rises to AED 2,000 for each subsequent late filing.
Book our VAT filing service, from AED 499 per return, to stay ahead of every quarterly or monthly deadline — see the VAT return 201 estimator for a full box-by-box breakdown.
Late VAT payment — percentage-based penalties
Unpaid VAT triggers a two-stage percentage penalty: 2% of the unpaid tax is charged immediately on the day following the due date, and if the amount remains unpaid, an additional 4% per month is charged on the outstanding balance, starting one calendar month after the due date, continuing monthly on any amount still unpaid, up to a maximum total penalty of 300% of the unpaid tax.
| Timing | Penalty charged |
|---|---|
| Day after due date | 2% of unpaid VAT |
| 1 month after due date (if still unpaid) | Additional 4% of unpaid VAT |
| Each further month unpaid | Additional 4% of unpaid VAT, up to 300% cap |
Example: AED 50,000 unpaid VAT — Day 1: AED 1,000 (2%). After 1 month: additional AED 2,000 (4%), total AED 3,000. After 2 months: additional AED 2,000, total AED 5,000, and so on until settled or the 300% cap (AED 150,000) is reached.
Incorrect returns and record-keeping failures
| Violation | Penalty |
|---|---|
| Submitting an incorrect tax return | AED 1,000 for the first violation, AED 2,000 for repetition within 24 months, plus any additional tax due |
| Failure to maintain required records and information | AED 10,000 for the first violation, AED 20,000 for repetition within 24 months |
| Failure to submit records in Arabic when requested by the FTA | AED 5,000 for first violation, AED 10,000 for repetition |
| Failure to display prices inclusive of VAT | AED 15,000 |
| Failure to notify the FTA of changes to business details (e.g. address, activity) | AED 5,000 for first violation, AED 10,000 for repetition |
| Tax Agent or Legal Representative failing to notify appointment | AED 10,000 |
Good bookkeeping avoids most of these — see our bookkeeping & accounting and financial reporting services.
Voluntary disclosure: reducing penalty exposure
If a business discovers an error in a previously filed VAT or Corporate Tax return resulting in a tax difference above AED 10,000, it must submit a Voluntary Disclosure (Form VAT211 for VAT, or the equivalent Corporate Tax disclosure) before the FTA identifies it independently. Voluntary disclosure carries a lower fixed penalty (AED 1,000 for the first disclosure, AED 2,000 for repetition) plus a percentage-based penalty of 5% or 4% per month (depending on timing) on the tax difference, compared to significantly higher penalties if the FTA discovers the error through an audit.
- Errors below AED 10,000 net tax impact can simply be corrected in the next return without a separate disclosure.
- Errors above AED 10,000 require a formal Voluntary Disclosure filed as soon as the error is identified — delay increases the percentage-based penalty.
- Our tax advisory team can prepare and submit voluntary disclosures with supporting calculations.
Penalty waiver and instalment requests
Taxpayers facing genuine hardship or exceptional circumstances (illness, natural disaster, unavoidable system failure, or a first-time inadvertent error) may apply to the FTA for a penalty waiver or reduction, or request to pay penalties and tax due in instalments. Applications are submitted via EmaraTax with supporting evidence, and the FTA has discretion to approve, partially approve, or reject the request based on the Cabinet Decision 105 of 2021 mechanism for penalty instalment, waiver and refund.
A 2025 update introduced a redetermination mechanism allowing certain unpaid administrative penalties to be reduced by 70% if settled within a specified period, provided all outstanding tax and remaining penalties are paid on time — a valuable relief avenue for businesses with historic unpaid fines.
Reconsideration process and timelines
If a business disagrees with a penalty imposed by the FTA, it can submit a Request for Reconsideration within 40 business days of being notified of the FTA's decision. The request must be in Arabic and clearly state the grounds for reconsideration with supporting evidence. The FTA is required to respond within 40 business days of receiving a complete request.
If the reconsideration is rejected or the business still disagrees, the next step is an objection to the Tax Disputes Resolution Committee (TDRC) within 40 business days of the FTA's reconsideration decision, followed by the option to escalate to the competent Federal Court if the disputed amount exceeds AED 100,000.
- 1FTA penalty decision issued.
- 2Request for Reconsideration filed within 40 business days (in Arabic).
- 3FTA responds within 40 business days.
- 4If rejected, objection to the Tax Disputes Resolution Committee within 40 business days.
- 5If still unresolved, escalation to the Federal Court (for disputes above AED 100,000).
Worked examples of accumulating fines
Example 1 — Late VAT registration and filing: A Dubai trading company exceeds the AED 375,000 threshold but registers 3 months late (AED 10,000 fixed penalty), then also misses its first two VAT return deadlines (AED 1,000 + AED 2,000 for repetition) = AED 13,000 total, before any unpaid tax penalties.
Example 2 — Late Corporate Tax return, 14 months overdue: AED 500 × 12 months = AED 6,000, plus AED 1,000 × 2 further months = AED 2,000, totalling AED 8,000 in late filing penalties alone, excluding the separate 14% per annum charge on any unpaid tax.
| Scenario | Penalty build-up | Total |
|---|---|---|
| Free zone SME in JAFZA: 4 months late VAT registration + first late return | AED 10,000 + AED 1,000 | AED 11,000 |
| SHAMS consultancy: unpaid VAT of AED 20,000 for 3 months | 2% + 4% + 4% = 10% of AED 20,000 | AED 2,000 |
| Meydan free zone company: CT return 18 months late | 12 × AED 500 + 6 × AED 1,000 | AED 12,000 |
Run your own numbers on the FTA Penalty Calculator and compare against the cost of timely filing with our VAT filing and corporate tax filing services.