UAE Administrative Penalty Framework: Cabinet Decision No. 129 of 2025 – VAT & Excise Changes from April 14, 2026
This fact is undeniable, the business environment of UAE is changing fast, and with it, the need to keep pace with regulatory changes is not only a question of compliance, but also confidence and survival
Recent Cabinet Decree No. 129 of 2025 by the UAE government redefines how vat penalties and administrative fines are applied under the taxation laws in the UAE, particularly for Value Added Tax (VAT) and Excise obligations. This new penalty system is set to be effective starting April 14, 2026, and has been chosen to promote clarity and fairness in addition to promote improved compliance across all sectors
Table of Contents
- What Is Cabinet Decision No. 129 of 2025?
- Why This Update Matters to Businesses?
- Key Changes in the VAT & Excise Penalty Framework
- Practical Compliance Checklist
- How Businesses Should Prepare?
- MBG Corporate Services: Helping You Stay Compliant
- FAQs
What Is Cabinet Decision No. 129 of 2025?
Cabinet Decision No. 129 of 2025 is a directive issued by the UAE Cabinet that revises the administrative penalties applicable under federal tax laws, including VAT and Excise Tax. It modernises the older system to be more transparent, proportionate, and predictable for businesses operating in the UAE.
It replaces previous penalty rules from earlier decisions and aligns penalty mechanisms with updated tax procedural laws. The goal? A more simplified form of penalty structure, which is easier to comprehend and compute, such that the businesses have time to take proactive measures towards paying taxes instead of responding to the fines
Why Does This Update Matters to Businesses?
The new penalty framework is more than legalese—it directly impacts your financial planning:
- It shifts from complex compounding fines to straightforward rates.
- It reduces penalties for certain administrative errors, particularly when corrected promptly.
- It promotes voluntary correction and assists in creating a stronger level of trust between the taxpayers and the Federal Tax Authority (FTA).
These changes acknowledge that not all errors reflect malicious intent; many are honest oversights.
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Key Changes in the VAT & Excise Penalty Framework
Key changes in revised vat penalties & Excise Penalty Framework are as follows:
| Area | Before April 14, 2026 | From April 14, 2026 (Cabinet Decision 129 of 2025) |
| Late Payment of Tax | 2% immediately + 4% monthly compounding (up to 200%) | 14% per annum calculated monthly on unpaid amounts |
| Incorrect Tax Return | AED 1,000–2,000 depending on repeat | AED 500 if not affecting tax due; relief possible |
| Voluntary Disclosure | Bracketed penalties up to 40% | 1% per month on the tax difference |
| Voluntary Disclosure after Audit Notice | 50% + monthly penalty | 15% fixed + 1% monthly |
| Failure to Submit Records in Arabic | AED 20,000 | AED 5,000 |
| Failure to Update Tax Records | AED 5,000–10,000 | AED 1,000 (first time); AED 5,000 if repeated |
Practical Compliance Checklist
In order to maintain robust tax compliance and to avoid unnecessary VAT penalties, follow this practical compliance checklist
- Ensure timely VAT and Excise tax filings
- Set reminders for tax payment due dates
- Keep all records accurate and in Arabic where required
- Correct any mistakes quickly using voluntary disclosures
- Monitor changes in your tax operations that may affect filings
- Keep clear documentation of your corrections and communications
These steps help reduce penalties and demonstrate your business’s commitment to compliance.
How Businesses Should Prepare?
The timeframe to October 14, 2026 (April 14, 2026), can be used to look at processes:
- Review internal accounting and reporting workflows.
- Revise documentation systems to new specifications.
- Train staff on the revised requirements under Cabinet Decision No. 129 of 2025.
- Run periodic internal audits to address issues before FTA notices.
MBG Corporate Services: Helping You Stay Compliant
Navigating tax compliance doesn’t have to feel overwhelming. At MBG Corporate Services, we specialise in navigating business through regulatory changes such as the Cabinet Decision No. 129 of 2025, particularly those that involve VAT and Excise.
Our team helps you interpret the new penalty framework, bringing out a compliance checklist that fits your operations, and simplifying your tax reporting procedures, all to enable you to concentrate on what you do best. Whether it’s preparing for voluntary disclosures or setting up robust reporting systems, MBG Corporate Services is here to support your business through every step of compliance with confidence.