UAE VAT and Excise penalties from 14 April 2026: what changed

Why the rules changed

The old regime punished a few days' delay almost as hard as a year's delay. A business that paid VAT one day late was hit with an immediate percentage penalty, then monthly increases on top. The new framework links the cost of late payment to how long the tax stays unpaid, which is closer to how interest works.

Late payment: from fixed percentages to 14% a year

Under the previous rules, unpaid VAT attracted 2% straight after the due date and a further 4% a month after that. From 14 April 2026, unpaid tax attracts a penalty at 14% per annum, accrued monthly, for as long as it remains unpaid.

Two practical points:

• A short delay now costs much less than before. A long delay still costs a lot.
• Tax due under a voluntary disclosure or a tax assessment has its own payment date of 20 business days. Missing that date starts the same monthly accrual.

Incorrect returns and voluntary disclosures

• Incorrect return: AED 500 for the first violation and AED 2,000 for a repeat. There is no penalty if you correct the return before its due date, or through a voluntary disclosure that does not change the tax due.
• Voluntary disclosure: a penalty of 1% per month on the tax difference, until the disclosure is submitted.
• Disclosure after an audit notice: an extra fixed 15% applies (reduced from 50% under the old rules). The message is clear: fix errors before the FTA asks.

Record keeping and invoices

• Failing to keep the required records: AED 10,000 per violation, AED 20,000 if repeated within 24 months.
• Failing to issue a tax invoice, tax credit note or alternative document within the legal period: AED 2,500 per case. This matters more as UAE e-invoicing arrives.

What to do now

1. Re-check your payment calendar. Late payment is now charged by the month, so every month counts.
2. Review last year's returns. If you find an error, a voluntary disclosure now costs far less than an audit finding.
3. Tighten invoice issuance. Make sure every invoice and credit note is issued within the legal time limit.
4. Keep records audit-ready. The record-keeping fine did not go down.

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