Penalties
Voluntary disclosure after 14 April 2026
The penalty for owning up changed on 14 April 2026. It is now 1% a month, and the gap between disclosing and being caught is wider than it has ever been. Here is the arithmetic.
Managing Partner, Exiloz Management & Tax Consultant LLC
In short
If a UAE VAT error is more than AED 10,000 of tax you must file a voluntary disclosure (Form 211) within 20 business days of becoming aware of it. Since 14 April 2026 a self-filed disclosure carries 1% a month on the underpaid tax; once the FTA notifies an audit, a fixed 15% applies instead, with the 1% still running on top.
The short version
- Error above AED 10,000: file a voluntary disclosure within 20 business days of becoming aware of it.
- Error of AED 10,000 or less: correct it in the next return that is not yet due.
- Disclose first and the penalty is 1% a month on the underpaid tax. Get audited first and it starts at 15%.
- Late payment is a separate charge again — 14% a year on the unpaid tax, from the day after it fell due.
What actually changed
Cabinet Decision No. 129 of 2025 was published on 10 November 2025 and took effect on 14 April 2026. It rewrote the administrative penalties across VAT, excise and corporate tax, and it changed the economics of admitting a mistake.
The old voluntary disclosure penalty was a fixed amount plus a percentage that escalated the longer you waited: 5%, 10%, 20%, 30%, 40% depending on how many times the return had gone by. The old late-payment charge was 2% immediately, then 4% a month, capped at 300% of the tax.
Both are gone. In their place: 1% per month on the underpaid amount for a disclosure you make yourself, and 14% a year on unpaid tax, applied monthly and not compounded, for the payment itself.
Our view: for anyone sitting on an old error, this is the most favourable window the UAE regime has offered. The escalating percentage used to punish age brutally. A flat 1% a month does not.
The AED 10,000 line
Not every error needs a disclosure form. Article 10 of Federal Decree-Law No. 28 of 2022 on Tax Procedures draws the line at AED 10,000 of tax difference.
- More than AED 10,000. You must submit a voluntary disclosure, VAT Form 211, within 20 business days of becoming aware of the error.
- AED 10,000 or less. You correct it in the tax return for the period in which you found it, or in a return that has not yet fallen due, whichever comes first. No form, no disclosure penalty.
Read the threshold carefully: it is the tax difference, not the invoice value. A missed AED 180,000 sale is AED 9,000 of VAT. That is under the line, and it goes in the next return.
And the clock runs from awareness, not from discovery by the FTA. The day your accountant emails you the reconciliation is the day the twenty business days start. In practice that email is the thing people forget to date.
What 1% a month costs, on real numbers
Take a manufacturer who under-declared output tax by AED 120,000 in the quarter ended 31 March 2026. The return fell due on 28 April 2026. The error surfaces during the audit prep in December — nine months later.
| Disclosed by the business | Found by an FTA audit | |
|---|---|---|
| Tax to pay | AED 120,000 | AED 120,000 |
| Disclosure penalty | 1% × 9 months = AED 10,800 | 15% fixed = AED 18,000, plus the 1% monthly charge |
| Late payment, 14%/yr on the tax | ≈ AED 12,600 | ≈ AED 12,600 |
| Roughly | AED 143,400 | AED 161,400 and rising |
The figures are illustrative and rounded; the FTA calculates monthly from its own dates. But the shape holds. Around AED 18,000 separates the two columns on a single quarter, and the audit column keeps growing while the correspondence goes back and forth.
One thing the table does not show: the 14% a year runs on the tax, not on the penalty, and it runs from the day after the original due date. Paying the principal early stops the largest meter even if the disclosure paperwork takes another fortnight.
The 15% cliff
The trigger is the audit notification. Once the FTA has told you it intends to audit a period, the reduced route closes for that period. The fixed 15% applies to the underpaid amount, the 1% monthly charge continues to accrue on top, and the late-payment charge is unaffected either way.
Which makes the decision simple in most cases and awkward in one. Simple: if you know about an error and there is no audit notice, disclose. Awkward: if you suspect an error but have not quantified it, you are choosing between filing a disclosure you cannot yet support and spending three weeks quantifying it while the 20-day clock may already be running.
What we do in that situation is quantify to a defensible number fast, file, and treat any refinement as a second disclosure. A disclosure with a working paper behind it is worth more than a perfect number filed after a notice arrives.
The trade-off nobody mentions
Here is the honest downside, because most articles on this leave it out.
Filing a voluntary disclosure puts a flag on that period. You are telling the FTA that a return it accepted was wrong, and you are handing over the reason. Occasionally that prompts questions about periods you did not disclose.
We still recommend disclosing in almost every case, for two reasons. The penalty gap is large and it widens with time. And a business that has disclosed once, cleanly, with schedules attached, is in a very different position during an audit than one that was caught. The record of correction is itself evidence of a controlled process.
The exception is the genuinely marginal case — a AED 3,000 tax difference on a closed period where the analysis would cost more than the exposure. That is a conversation, not a rule.
How the filing actually goes
Inside EmaraTax you open the VAT tile, find the tax period in the returns list, and submit the voluntary disclosure against that specific return. It is Form 211, and it is per return. Three wrong quarters means three disclosures, oldest first.
The form wants the figure as originally reported, the corrected figure, and the difference, box by box. Attach a letter explaining what happened and a schedule reconciling the two. The letter matters more than people think. A disclosure that says “omitted output tax” and a disclosure that says “three export invoices were coded zero-rated in error; the customer had no export evidence; schedule attached” get read very differently.
Then pay. Use the GIBAN for the tax and watch the value date, not the transfer date.
The habit that causes most of this
“We will fix it in the next return.”
For a AED 4,000 difference, that instruction is correct and the law says so. For a AED 40,000 difference it is a breach with a 20-business-day fuse on it, and the person who said it usually did not know the two cases have different rules.
The cheapest control we know: a standing line in your month-end close that asks one question. Is any prior-period VAT adjustment sitting in this month's journals, and is the tax effect above AED 10,000? If yes, it goes to whoever decides, that day. It takes a minute and it starts the clock on purpose rather than by accident.
Questions we get asked
What is the penalty for a voluntary disclosure in the UAE in 2026?
Under Cabinet Decision No. 129 of 2025, in force since 14 April 2026, a voluntary disclosure filed before the FTA notifies you of an audit attracts 1% per month on the underpaid tax, calculated from the original due date to the date of disclosure. The old escalating 5% to 40% percentages no longer apply.
When must I file a voluntary disclosure rather than fix it in the next return?
When the tax difference is more than AED 10,000. Article 10 of Federal Decree-Law No. 28 of 2022 requires the disclosure within 20 business days of becoming aware of the error. At AED 10,000 or less you correct it in the next return that has not yet fallen due.
What happens if the FTA finds the error before I disclose it?
Once an audit notification has been issued for that period, the reduced route closes. A fixed 15% penalty applies to the underpaid amount, the 1% monthly charge continues on top, and the separate late-payment charge of 14% a year on the unpaid tax still runs.
Is late payment charged on top of the disclosure penalty?
Yes. They are separate. Late payment accrues at 14% a year on the unpaid tax, applied monthly and not compounded, from the day after the tax fell due until it is settled. Paying the principal early stops that charge even while the disclosure is being processed.
Can I file one voluntary disclosure for several periods?
No. A voluntary disclosure is filed against a specific tax return. Three incorrect quarters means three separate disclosures, and we file them oldest first so the penalty clock stops on the largest exposure first.
Sources of record
- Cabinet Decision No. 129 of 2025 on administrative penalties (in force 14 April 2026)
- Federal Decree-Law No. 28 of 2022 on Tax Procedures, Article 10
- FTA — Voluntary Disclosure user guide (VAT and Excise)
Written by Safvan, Managing Partner, Exiloz Management & Tax Consultant LLC, from work carried out for UAE-registered clients. General information about UAE VAT, current at 10 August 2026. It is not tax advice and does not create a client relationship — see our disclaimer. Confirm your own position with the FTA, or with us, before acting.
