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May 15, 2026

This Public Clarification, TAXP001, details amendments to the administrative penalties regime under Cabinet Decision No. 49 of 2021, which modifies Cabinet Decision No. 40 of 2017. The clarification explains reduced fixed penalties and outlines new calculation mechanisms for specific violations listed in the tables appended to the original decision. Key changes affect penalties for late payment of tax, submission of incorrect tax returns, and the failure to make a voluntary disclosure. It clarifies the time-based, percentage-based penalties for voluntary disclosures, which incentivise timely correction of errors, in line with the violations listed under Article 25 of the FTP Law.

TAXP001

Tax Procedures Public Clarification

Amendments to the Penalties Regime

Issue

On 28 April 2021, the Cabinet issued Decision No. 49 of 2021 on Amending some Provisions of Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE (“Cabinet Decision No. 49 of 2021”). Cabinet Decision No. 49 of 2021 amended some of the administrative penalties applicable to certain violations and allows for a redetermination of some of the penalties already imposed.

This Public Clarification provides detailed information on the introduced amendments to some of the administrative penalties.

Summary

Cabinet Decision No. 49 of 2021 amends certain penalties applicable to violations listed in the Tables appended to Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of tax laws in the UAE (collectively referred to as “Cabinet Decision”).

Detailed discussion

Background

The UAE introduced Excise Tax and VAT with effect from 1 October 2017 and 1 January 2018, respectively.

In order to offer consistency in the administration of different taxes, a set of common tax procedures concerning the rights and obligations of the FTA and taxpayers has been developed and prescribed in Federal tax procedures legislation, including in Federal Law No. 7 of 2017 on Tax Procedures (“FTP Law”). These Federal tax procedures apply to all Federal taxes under the jurisdiction of the FTA.

Article 25 of the FTP Lawspecifies a number of violations which are subject to administrative penalties. This Article also directs the Cabinet to issue a decision that specifies administrative penalties for each of the violations listed in the Article, on condition that each of such penalties cannot be less than AED 500 for any violation and cannot exceed three times the amount of tax in respect of which the penalty was levied.

The specific penalties for each violation are prescribed in the Cabinet Decision No. 40 of 2017, which was issued on 24 September 2017. These penalties have been applied to violations since the introduction of the VAT and Excise Taxes.

On 28 April 2021, the Cabinet has issued the Decision No. 49 of 2021, which amends some of the administrative penalties applicable on the violations stated in Tables appended to Cabinet Decision No. 40 of 2017. This Public Clarification discusses some of the more significant amendments in more detail to ensure that there is certainty regarding the application of these amended penalties.