Lower fines and simplified rules are intended to ease compliance and support businesses.
Dubai: The Federal Tax Authority has introduced sweeping revisions to tax penalties, reducing fines and updating how violations are assessed, with the aim of easing compliance and encouraging businesses to rectify past errors.
The amendments, which are now in effect, revise administrative penalties related to VAT, excise tax, and broader tax procedures, with several fines reduced and the methods for calculating penalties also updated.
The changes come as businesses face stricter reporting requirements, with the revised framework designed to reduce compliance costs while encouraging more timely disclosures.
5 key changes businesses need to know
The updates affect several areas of tax compliance, including record-keeping and voluntary disclosures, with a strong emphasis on lowering penalties while improving accountability.
1. Lower penalties across common violations
Several fines have been significantly reduced, particularly those related to routine procedural breaches commonly faced by businesses.
The penalty for failing to provide tax-related records in Arabic when requested has been reduced from Dh20,000 to Dh5,000, while fines associated with delays in updating tax records have also been lowered.
The Federal Tax Authority said the reductions are intended to ease the burden on businesses while maintaining strong compliance standards.
“The new amendment, which includes reductions in a number of administrative penalties imposed for violations of tax laws, comes within the framework of the wise leadership’s directives to implement the tax system in accordance with international best practices,” said Abdulaziz Mohammed Al Mulla, Director General of the Federal Tax Authority.
The amendments are designed to support taxable persons in achieving voluntary compliance and correcting their positions where violations occur. They also encourage registrants to promptly notify the Authority of any cases requiring updates to their tax records and to submit voluntary disclosures when necessary, with reduced exposure to significant financial penalties.
Abdulaziz Mohammed Al Mulla, Director General of the Federal Tax Authority
2. New structure for repeat violations
The revised framework introduces a more structured approach to repeat offences, replacing higher flat penalties with a tiered system.
Businesses that fail to update their tax records will now face a penalty of Dh1,000 per violation, rising to Dh5,000 if the same issue is repeated within 24 months—replacing the previous penalties of Dh5,000 and Dh10,000.
The change is intended to improve predictability in penalty exposure while encouraging more timely updates and compliance.
3. Relief for legal representatives
Penalties applied to legal representatives have been revised, with the fine for failing to notify the Authority of their appointment reduced from Dh10,000 to Dh1,000.
The liability continues to rest with the representative and must be paid from their own funds, reinforcing accountability while easing financial exposure.
4. Stronger push for voluntary disclosures
The Authority has strengthened its focus on voluntary compliance, encouraging businesses to correct errors before undergoing audits.
The amendments reduce the financial burden associated with voluntary disclosures related to incorrect tax returns, delayed submissions, and refund claims, provided businesses take corrective action before being notified of an audit.
“We call on tax registrants, where violations of tax legislation exist, to benefit from the significant advantages provided by the decision, which introduces additional facilitations aimed at reducing the tax burden on business sectors,” said Al Mulla.
5. Wider coverage across tax obligations
The updated rules now extend to a broader range of tax compliance areas, including late payments, incorrect filings, and failures to account for tax on behalf of others where required.
The Federal Tax Authority said the expanded scope is intended to help businesses regularise their tax positions while enhancing overall transparency within the system.
“They also encourage registrants to notify the Authority of any cases that may require amendments to the information contained in their tax records and further encourage the prompt submission of voluntary disclosures, where required, without exposure to significant financial penalties,” Al Mulla added.
