From 14 April 2026, unpaid UAE tax accrues a late-payment penalty at an annualised 14%, charged monthly. Voluntary disclosures cost 1% a month on the tax difference, plus 15% if made after an audit notice. From 1 January 2026, refund claims and input VAT recovery are also limited to five years.
How is late payment penalised now?
At an annualised 14%, accrued monthly on the unpaid amount, replacing the earlier fixed percentages (Al Tamimi summary of Cabinet Decision No. 129 of 2025). Small arrears now cost less in the first months, and large arrears left for years cost more.
What does a voluntary disclosure cost?
1% a month on the tax difference, with an additional 15% where the disclosure follows a tax audit notice, down from 50% under the old rules (Al Tamimi). The message is clear: correct errors before the FTA asks.
“The amended law will come into effect on 1 January 2026.”
What changed in the Tax Procedures Law?
From 1 January 2026, refunds and the carry-forward of input tax are limited to five years, the FTA can issue binding guidance, and reverse-charge imports no longer require self-invoicing (UAE Ministry of Finance). Old refund positions need to be claimed before they fall out of the five-year window.
Which administrative penalties fell?
Several. Failing to update the tax record, for example, fell from AED 5,000 to AED 1,000 for a first violation and from AED 10,000 to AED 5,000 for a repeat within 24 months (Al Tamimi).
Worked example: paying three months late
A company owes AED 120,000 of corporate tax and pays three months after the deadline. At an annualised 14%, the late-payment penalty is roughly 120,000 × 14% × 3/12 = AED 4,200 (Al Tamimi). Leave it for two years and it grows to about AED 33,600. The longer the delay, the more the new regime costs compared with paying late but promptly.
Old rules versus new, side by side
| Item | Before 14 April 2026 | From 14 April 2026 |
|---|---|---|
| Voluntary disclosure after an audit notice | Up to 50% extra | 15% extra |
| Failing to update the tax record (first time) | AED 5,000 | AED 1,000 |
| Repeat within 24 months | AED 10,000 | AED 5,000 |
Source: Al Tamimi summary of Cabinet Decision No. 129 of 2025.
Our view
Pay first, argue later. The new regime rewards speed: a short delay is cheap, a long one is not. If you disagree with an assessment, pay the undisputed part on time and challenge the rest through reconsideration.
Frequently asked questions
Do the new penalties apply to old errors?
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The new schedule applies from 14 April 2026; transitional rules decide how earlier periods are treated.
Is a voluntary disclosure still worth it?
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Usually yes, especially before an audit notice, when the extra 15% does not apply.
Can penalties be appealed?
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Yes, through reconsideration with the FTA and then the dispute committees.
Is the 14% rate compounded?
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It is described as an annualised rate charged monthly on the unpaid amount; check the FTA calculation for your case.
Sources
- UAE introduces comprehensive tax penalty reform, effective 14 April 2026 (Cabinet Decision No. 129 of 2025) — Al Tamimi & Company. Checked 16 October 2026.
- Ministry of Finance to implement amendments to the Tax Procedures Law starting early 2026 (Federal Decree-Law No. 17 of 2025) — UAE Ministry of Finance, 29 November 2025. Checked 16 October 2026.