UAE VAT Penalties 2025 – Updated FTA Fine List & How to Avoid

Why Do VAT Penalties Occur?

The Federal Tax Authority (FTA) imposes administrative penalties to enforce compliance with UAE VAT laws. These penalties apply for:

Missing deadlines
Filing incorrect returns
Delayed payments
Failure to maintain proper records

Non-compliance may also trigger audits or blocking of refund claims.

Updated VAT Penalties in UAE (As of 2025)

Here is a breakdown of common VAT violations and their penalties:

Violation	Penalty Amount (AED)
Failure to register for VAT on time	10,000
Late VAT return filing	1,000 (1st time), 2,000 (repeat)
Late VAT payment	2% of unpaid tax + 4% after 7 days + 1% daily (up to 300%)
Failure to issue tax invoice	2,500 per invoice
Failure to keep required records	10,000 for each violation
Not displaying prices inclusive of VAT	5,000
Failure to submit Voluntary Disclosure (VD)	3,000 (1st time), 5,000 (repeat)
Errors in the VAT return (without VD)	50% of the tax underpaid + interest
Incorrect TRN on invoice	5,000
Issuing false or misleading documents	5,000 per document

FTA updates its penalties periodically. Always check the FTA website for latest rules.

Timeline of VAT Compliance Deadlines

Activity	Deadline
VAT Return Filing	Within 28 days after end of tax period
VAT Payment	Same as filing deadline
VAT Registration	Within 30 days of crossing threshold
Voluntary Disclosure	Within 20 business days of discovering error

Common Reasons for VAT Penalties

Missing filing/payment deadlines
Incorrect calculation of output/input VAT
Misclassification of zero-rated or exempt supplies
Failure to issue compliant tax invoices
Inadequate document retention (minimum 5 years required)

How to Avoid VAT Penalties in UAE

Register on time: Monitor your revenue and thresholds
File returns early: Don’t wait until the 28th day
Use accounting software: Automate calculations and track VAT
Keep valid tax invoices: Ensure they include all required elements
Respond to FTA notices: Delays may increase penalties
Use a tax consultant: Avoid costly errors with expert help
Submit voluntary disclosures when errors are discovered

What is a Voluntary Disclosure?

A Voluntary Disclosure (VAT211) is submitted to correct errors in your VAT return before the FTA discovers them.

Filing a VD reduces your penalty exposure. You must file within 20 business days from the discovery of the error.

Most Searched VAT Penalty Questions (2025)

Q: What happens if I don’t file a VAT return?
A: You’ll face a fine of AED 1,000, increasing to AED 2,000 for repeated offenses.

Q: Can I appeal an FTA penalty?
A: Yes, by submitting a reconsideration request within 20 business days of penalty issuance.

Q: What if I file but don’t pay VAT?
A: The FTA charges escalating interest and daily penalties until payment is made.

Q: Are there any amnesties in 2025?
A: As of now, no new amnesty has been announced. Businesses must comply with standard penalty rules.

Conclusion

VAT penalties can be costly and damaging to your business. Staying compliant with UAE VAT law requires timely filing, accurate reporting, and proper recordkeeping. Avoiding fines not only saves money but also builds trust with the FTA and clients.

Need Help Avoiding VAT Penalties?

At Think Biz Management Consultancies, we help you:

File VAT returns accurately and on time
Respond to FTA notices and audits
Submit voluntary disclosures correctly
File reconsideration requests for unfair penalties
Implement robust VAT compliance systems

Contact us today for a free consultation.
Stay compliant, avoid fines, and grow your business with confidence.

Contact number: ‪+971 50 983 0334‬

Email ID: info@alphabets.ae