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An analysis by Al Tamimi & Co, Taxand UAE
The UAE has introduced Cabinet Decision No. 129 of 2025, establishing a unified penalty framework for VAT and Excise Tax violations effective from April 2026. This replaces the previous regime with a more transparent and business-friendly approach, focusing on encouraging voluntary compliance and reducing fines for minor errors. Key reforms include eliminating compounding penalties, setting a fixed 14% annual rate for late payments, and introducing fixed penalties for Voluntary Disclosures.
Businesses are encouraged to prepare by reviewing tax governance, managing cash flow to avoid late payment penalties, ensuring e-invoicing readiness, developing a Voluntary Disclosure strategy, preventing error compounding, and adjusting risk management for complex operations.
Shiraz Khan, Samer Qudah, Sahid Daud, Anuj Bhasin, and Sabeeha Moola from our UAE member firm Al Tamimi & Co have analysed the key amendments by violation and the impact on businesses, which can be read here.
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