UAE Tax Penalties Reduced and Discounts Granted

UAE Tax Penalties Reduced and Discounts Granted

Looking for an opportunity to reduce or avoid VAT penalties which have been accumulating over a period of time? This information must give you an useful insight for the same.

The UAE Cabinet of Ministers issued Decision No. 49/2021 amending provisions of Cabinet Decision No. 40/2017 regulating tax penalties on 28th April 2021 which are:

  • Late penalty dates have been revised
  • Penalties reduced from 1% per day to 4% per month
  • Late penalty still capped at maximum 300%
  • Chances of reduction of previous unpaid penalties

Horizon Biz Consultancy is a certified tax agent with team of professionals who will advise you to avoid penalties and other queries.

Penalty reduction information:

New calculation of late payment penalties will be calculated as follows:


2% of the unpaid tax immediately past the due date.

4% is due on the seventh day following the due date.

1% per day after a calendar month from the due date.


2% of the unpaid tax immediately past the due date.

4% per month thereafter commencing a month after the due date.

*The 300% cap on the late payment penalties is still applicable.

In Summary, the late payment penalties have been reduced from 1% per day to 4% per month for the due amount after a calendar month.

Its duty of the business to maintain proper records, not being able to provide when asked can lead to penalty of AED 10,000 for first time and 20,000 on repetition.

Due date/start of penalties:

In October 2020, the UAE Federal Supreme Court ordered that late payment penalties should apply retrospective to the voluntary disclosure, calculated as of the date of the original tax return.

  • 20 weekdays as of the date of submission of a voluntary disclosure
  • 20 weekdays as of the date of a tax audit

The text of the new Decision is explicit and reads to apply the late payment penalties 20 weekdays from the date of a voluntary disclosure or audit assessment, as opposed to retrospectively.

This should be read in caveat with the Supreme Court order that late payment penalties apply retrospectively from the date of the original tax return.

Voluntary disclosure:


Previously voluntary disclosure followed fixed base penalty where if disclosed for

First time – AED 3,000

Repetition – AED 5,000


In case while filing the vat there are some error, voluntary disclosure penalty has been reduced, it is 5% in the first year on the difference amount from date of tax return, assessment or related claim, 10% in the second year and 30% in third year and so on.

Discounts for previous penalties:

The new Decision grants the Federal Tax Authority to decrease your penalty provided the following conditions are met:

  1. Regularly pay your taxes till December 2021
  2. Pay 30% of your previous outstanding balance for penalty charged as per previous cabinet decision
  3. Lead to decrease in tax penalty by 30%

We can help you maintaining and guiding at each step and walk through your success story.

How Can We Help?

Get your 1st Free Meeting of Tax Consultation from Horizon Biz Consultancy

Horizon Biz Consultancy is experienced in Tax consultation, business consultation, business/company setup, and accounting services. Our UAE based, qualified auditors, consultants and accountants are experienced working with many small and leading businesses/companies and organization.

Would you like to know more about Tax Consultation Service or any other services?

Speak to our experts today.

We are providing not only Dubai’s, but United Arab Emirates’ best Business Consultation Services.

We are working since 6 decades. And years of experience will never let you down.


– VAT/Tax Consultation Services

– Audit Services

– Business Consultation Services

– Company/Business Setup Services

– Company Liquidation Services

– Trading License Advisory Services

– Accounting & Book-keeping Services

– Outsource Accounting Services

– Outsource CFO Services

– Outsource Payroll Processing Services

– Financial Services etc.

Call us Now, For a Free Consultancy!

Call: +971501042665


Read More:

All About VAT Payments in UAE

Vat Reconsider in UAE

Economic Substance Regulations in UAE

Quick Contact
Call us Whatsapp
Quick Contact