Two things are due on the twenty-eighth day after the end of your tax period: the return and the money. They are one deadline, not two, and a return filed on time with the payment following a week later is a late payment — the FTA's position is that the funds have to have arrived, not merely been instructed.
Your period, and the stagger behind it
Most businesses file quarterly; larger ones file monthly. Which quarters you file is not your choice and is usually not calendar quarters: the FTA assigns a stagger when you register, and it fixes both your period end dates and your tax year end. The stagger matters beyond the calendar, because the tax year end is what schedules the input tax apportionment annual adjustment — that adjustment belongs in the first return after the tax year ends, not in the first return of the calendar year.
The penalty schedule, as it actually reads
Cabinet Decision No. 49 of 2021 replaced the earlier schedule and is the one in force. A great deal of published commentary still quotes the superseded 2017 numbers, so it is worth reading the decision rather than an article about it — including this one.
| Failure | Penalty |
|---|---|
| Filing a return late — first time | AED 1,000 |
| Filing late again within 24 months | AED 2,000 |
| Paying late | 2% of the unpaid tax the day after the due date, then 4% on each monthly anniversary, capped at 300% |
| Submitting an incorrect return | AED 1,000, then 2,000 on repeat — but if the tax difference is smaller than the fixed penalty, the penalty is the difference, with a floor of AED 500 |
| Late registration | AED 10,000 |
| Late deregistration | AED 1,000 per month, capped at AED 10,000 |
Voluntary disclosure is tiered, not flat
This is the part most secondary sources still get wrong. The penalty on a voluntary disclosure depends on how long after the original return you make it, and it rises in bands: 5% in the first year, 10% in the second, 20% in the third, 30% in the fourth, and 40% thereafter. It is not a flat monthly percentage.
The corollary is uncomfortable but useful: the cost of a disclosure quadruples between year one and year three. Finding an error early is not merely tidier, it is four times cheaper. And if you do not disclose before the FTA notifies you of an audit, the penalty becomes 50% of the tax plus 4% per month or part month — and here part months do count in full, unlike the late-payment rule.
Nil returns and final returns
A period with no transactions still needs a return. A nil return carries the same deadline and the same late-filing penalty as any other, and "we had nothing to report" has never been a defence. At the other end, deregistering does not end the obligation quietly either: the final return has to account for a deemed supply of the assets on hand on which you recovered input tax.
Questions people actually ask
Does filing on time but paying late still attract a penalty?
Yes. Filing and payment are separate obligations sharing one deadline. The late-payment penalty starts the day after the due date at 2% of the unpaid tax and adds 4% on each monthly anniversary.
Is there any advantage to disclosing an error myself?
A large one. A voluntary disclosure in the first year carries 5%. Failing to disclose before the FTA notifies you of an audit carries 50% plus 4% per month or part month. The gap between those two numbers is the entire argument for reviewing your own returns.
How long do I keep the records?
At least five years for VAT records generally, and longer for real estate — fifteen years from the end of the tax period for capital assets in property. The practical rule is that anything feeding a return must be reproducible for as long as that return can be examined.
Where these facts come from
Checked against the following on 31 August 2026. Rules and dates change — if you are reading this long after that date, verify before you act on it.
- Cabinet Decision No. 49 of 2021 on administrative penalties
- Federal Decree-Law No. 28 of 2022 on Tax Procedures
- Federal Tax Authority — VAT returns and payments
WisoBooks is a bookkeeping and business-management tool, not an accounting, tax or legal advisor. Nothing on this page is tax advice, and tax rules change. Confirm your own obligations with the relevant authority or a qualified advisor.
