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Cabinet Decision No. 129 of 2025 replaced the old daily late payment mechanism with a 14% annual charge and reset the fixed penalties for late returns. A separate decision adds a dedicated schedule of e-invoicing fines.
DRB Al Hikma Accounting LLC · Business Bay, Dubai · Updated August 2026 · 5 min read
In October 2025 the UAE Cabinet approved Cabinet Decision No. 129 of 2025, introducing significant changes to the administrative penalties applicable to violations of UAE tax laws. It was officially published on 10 November 2025 and came into effect on 14 April 2026.
The gap between publication and entry into force was deliberate. It gave businesses a window to adjust. That window has closed.
The headline structural change is to how late payment is charged. The previous regime applied a daily penalty structure. Under the new framework, late payment accrues at 14% per annum, calculated monthly from the day after the due date until payment is made.
The practical effect depends on how late you are. Short delays are treated more proportionately than under a daily accrual model. Sustained non-payment, however, compounds steadily and predictably. A 14% annual charge on an unpaid tax liability is a meaningful cost of capital, and one that no business would knowingly accept from a lender.
| Situation | Penalty |
|---|---|
| First late submission of a VAT return | AED 1,000 |
| Repeated late filing within 24 months | AED 2,000 |
| Late payment of tax due | 14% per annum, calculated monthly from the day after the due date |
The 24-month look-back is worth noting. A business that files late once and then again eighteen months later is treated as a repeat offender, not as two isolated incidents.
Separately, Cabinet Decision No. 106 of 2025 introduces a specific schedule of administrative fines for breaches of the Electronic Invoicing System.
| Breach | Penalty |
|---|---|
| Failure to implement the electronic invoicing system | AED 5,000 per month |
| Each e-invoice or credit note not issued or sent within the prescribed timeframe | AED 100 per document |
The per-document charge is the one to model. A business issuing 400 invoices a month that is technically connected but consistently transmitting late is exposed to a figure that scales directly with its trading volume. For a busy trading or services business, that arithmetic gets uncomfortable quickly.
Alongside the penalty changes, amendments to the Executive Regulations on Tax Procedures, effective 1 April 2026, clarified the procedures for submitting voluntary disclosures and aligned them with the amended Tax Procedures Law.
The logic is straightforward. If an error in a prior return will eventually surface, the cost of surfacing it yourself is lower than the cost of having it assessed. With late payment now compounding at 14% per annum, delay has a measurable price attached to it.
A structured review of your filing history, with VAT returns reconciled to accounting records, corporate tax positions checked against the FTA published clarifications, and invoice documentation tested against the amended requirements, is a comparatively small investment against that exposure.
DRB Al Hikma Accounting LLC supports businesses across Dubai and the UAE with accounting and bookkeeping, tax advisory and compliance, corporate services, financial consulting, payroll and audit.
Disclaimer: This article is provided for general information only and reflects publicly available information as at August 2026. It is not tax, legal or accounting advice. Tax legislation, Cabinet Decisions and FTA guidance are subject to change, and the treatment of any business depends on its specific facts. Please confirm your obligations with the Federal Tax Authority or seek professional advice before acting.