The Federal Tax Authority in the UAE imposes administrative penalties on a defined set of violations set out in Federal Decree-Law No. (28) of 2022 on Tax Procedures, most notably delays in tax registration, filing a tax return, paying tax, or keeping records. The Authority issues the penalty assessment and notifies the person within five working days, and no administrative penalty may exceed twice the amount of the tax to which the assessment relates.
Violations That Trigger an Administrative Penalty Assessment
The law provides that "the Authority shall issue the administrative penalty assessment for the person and notify them of it within five (5) working days" in a number of cases, most notably:
- The taxable person's failure to submit a tax registration application within the deadline set by the Tax Law.
- The registrant's failure to submit a deregistration application within the deadline.
- The registrant's failure to submit the tax return within the deadline set by the Tax Law.
- The taxable person's failure to pay the payable tax within the deadline.
- Submitting an incorrect tax return, or failing to provide data and records in Arabic when requested by the Authority.
- Failing to provide facilities to the tax auditor during a tax audit.
In some of these cases, such as a legal representative's failure to notify their appointment or to submit the tax return within the set deadlines, the law provides that the penalty shall be paid "from the legal representative's own funds," not from the taxable person's funds.
The Cap on the Amount of an Administrative Penalty
The law sets an explicit ceiling on the amount of any administrative penalty, providing that "the amount of any administrative penalty shall not exceed twice the amount of the tax for which the administrative penalty assessment was issued." The law also confirms that imposing an administrative penalty does not exempt the person from paying the tax originally due, as "the imposition of any administrative penalty under the provisions of this Decree-Law or any other law shall not exempt any person from liability to pay the payable tax."
The Difference Between an Administrative Penalty and Tax Evasion Crime
The law distinguishes between an administrative violation and a criminal offense. A person who deliberately commits tax evasion, such as intentionally refraining from paying tax due or deliberately reducing the actual value of their business to avoid registration, is punished by imprisonment and a fine of no less than the amount of tax evaded and not exceeding three times that amount, or by either of these two penalties. Repetition is considered an aggravating circumstance: a person is considered a repeat offender if they commit another of the same offenses within five years of a prior final conviction.
Who Bears Responsibility for Paying the Penalty?
As a rule, an administrative penalty is imposed on the person who committed the violation, whether a taxable person, a registrant, or a legal representative. As noted above, the law treats some failures by a legal representative differently by making the penalty payable specifically from that representative's own funds, distinguishing between the liability of the legal person itself and the liability of whoever represents it before the Authority.
Penalties Do Not Replace Payment of the Tax Itself
The underlying rule remains that an administrative penalty is a sanction independent of the tax itself: paying it does not extinguish the obligation to pay the tax due, and paying the tax does not extinguish the penalty imposed because of the violation. The detailed schedule for the amount of each administrative penalty is issued by Cabinet decision, but that amount remains in all cases governed by the "twice the tax amount" ceiling expressly set out in the law.
Legal References
- Federal Decree-Law No. (28) of 2022 on Tax Procedures — Article (24), Article (25).
For questions about your specific situation, you can ask the UAE Tax & Legislation Helper on Helpers, or consult a licensed chartered accountant.