FTA Announces New Penalty Rules, Significantly Reduces Fines for Violations
The Federal Tax Authority (FTA) has introduced a major update to its administrative penalty framework, bringing significant reductions in fines and a more flexible compliance system. The new rules, which came into effect on April 14 under Cabinet Decision No. 129 of 2025, mark an important shift toward simplifying procedures and reducing the financial burden on businesses.
This latest move is designed to encourage compliance, support operational efficiency, and allow entities to correct errors without facing heavy penalties.
New Rules Aim to Simplify Compliance
The updated framework replaces and amends parts of the earlier Cabinet Decision No. 40 of 2017. The goal is clear: make compliance easier and more practical while maintaining regulatory discipline.
Under the new system, businesses and individuals are given more room to:
• Correct mistakes
• Update records on time
• Submit disclosures without excessive penalties
This reflects a modern regulatory approach focused on cooperation rather than strict enforcement.
Key Changes in Penalty Structure Reduced Fines for Violations
One of the most notable updates is the sharp reduction in several administrative penalties.
• Failure to submit Arabic-language records upon request now carries a fine of AED 5,000, reduced from AED 20,000
• Failure to notify changes requiring record updates is now AED 1,000 per violation, increasing to AED 5,000 for repeat cases within 24 months
• Legal representatives who fail to notify their appointment now face a reduced fine of AED 1,000 instead of AED 10,000
These changes significantly lower the financial impact of non-compliance.
Adjustments to Reporting and Payment Penalties
The FTA has also revised penalties related to:
• Late submissions
• Incorrect filings
• Delayed payments
The updated rules allow more flexibility, particularly in cases where entities voluntarily disclose errors before or after being notified of an audit.
Encouraging Voluntary Disclosure
A key objective of the new framework is to promote voluntary correction. Entities are encouraged to review their records and fix any inaccuracies without fear of severe penalties.
By allowing corrections at an earlier stage, the system becomes more efficient and less punitive.
Focus on Transparency and Accuracy
The revised rules place strong emphasis on maintaining accurate and up-to-date records. Businesses are encouraged to promptly inform the authority of any changes that may affect their records.
This ensures:
• Better data quality
• More reliable reporting
• Smoother regulatory processes
The new structure supports a more transparent and accountable business environment.
The introduction of reduced penalties highlights a broader shift toward creating a supportive regulatory ecosystem. Instead of imposing heavy fines, the updated system focuses on:
This balanced approach benefits both regulators and businesses.
Leadership Perspective
According to the FTA, the amendments align with international best practices and aim to create a flexible and responsive regulatory framework.
The authority emphasized that the changes are part of ongoing efforts to:
• Continuously improve regulations
• Adapt to evolving business needs
• Maintain a competitive economic environment
What Businesses Should Do Now
With the new rules already in effect, businesses should take proactive steps to ensure compliance:
• Review and update all records
• Ensure timely notifications of any changes
• Submit disclosures where necessary
• Monitor deadlines closely
Taking early action can help avoid penalties and ensure smooth operations under the new system.
Conclusion
The FTA’s revised penalty framework represents a significant improvement in how compliance is managed. By reducing fines and offering greater flexibility, the new rules create a more practical and supportive environment for businesses.
This update signals a clear move toward modern, efficient regulation; where compliance is encouraged through facilitation rather than heavy penalties. Businesses that adapt quickly to these changes will benefit from reduced risks, improved processes, and greater operational confidence.
