Cabinet Decision No. 40 of 2017 and Its Amendments — A Complete Guide to UAE Tax Administrative Penalties

Cabinet Decision No. 40 of 2017, issued by the UAE Cabinet on 24 September 2017 and most recently amended by Cabinet Decision No. 129 of 2025 (effective 14 April 2026), is the primary legal instrument governing administrative penalties for violations of tax laws in the UAE. It covers the Federal Tax Procedures Law, Excise Tax Law, and Value Added Tax Law — making it essential reading for any registrant, taxable person, or legal representative operating in the UAE.

What Is Cabinet Decision No. 40 of 2017?

This Cabinet Decision establishes a structured schedule of administrative penalties — expressed in UAE Dirhams — that the Federal Tax Authority (FTA) may impose on persons who violate the provisions of the Tax Procedures Law or the applicable Tax Laws. The decision does not replace the obligation to pay the underlying tax; it adds a separate monetary consequence for non-compliance.

Amendment History — Four Versions in Effect

The decision has been amended three times since its original issuance:

• Cabinet Decision No. 40 of 2017 — original issuance, effective 24 September 2017.
• Cabinet Decision No. 49 of 2021 — effective 28 June 2021. Introduced the rule that if a monthly penalty falls on a date that does not exist in a given month, the first day of the following month applies.
• Cabinet Decision No. 108 of 2021 — effective 1 January 2022. Further refinements to penalty structures.
• Cabinet Decision No. 129 of 2025 — effective 14 April 2026. Amended Article 1 (definitions), Table 1 (Tax Procedures penalties), and Table 3 (VAT penalties).

Three Penalty Tables — What They Cover

The decision is structured around three penalty tables:

• Table 1 — Tax Procedures Law: 15 violation categories covering record-keeping failures, late registration, late filing, non-payment, incorrect returns, voluntary disclosure timing, and obstruction of tax audits.
• Table 2 — Excise Tax: 3 violation categories, including failure to display tax-inclusive prices, non-compliance in Designated Zones, and failure to provide price lists.
• Table 3 — Value Added Tax: 6 violation categories, including failure to display prices inclusive of VAT, failure to notify the FTA of margin-scheme application, and failure to issue tax invoices or credit notes within the legally specified period.

Key Definitions You Must Know

Article 1, as amended by Cabinet Decision No. 129 of 2025, defines the core terms. The most operationally important are:

• Tax Difference: The gap between the Due Tax as calculated and the Due Tax as it should have been calculated — this figure drives the percentage-based penalties under items 11 and 12 of Table 1.
• Voluntary Disclosure: A form submitted by the taxpayer notifying the FTA of an error or omission in a Tax Return, Tax Assessment, or tax refund application. Timing of the voluntary disclosure relative to a tax audit notification is the single most consequential compliance decision.
• Tax Assessment: A decision issued by the FTA related to Payable Tax or recoverable tax — the 20-business-day clock for payment starts from the date of receipt.

The 2025 Amendment — What Changed for VAT Registrants

Cabinet Decision No. 129 of 2025 amended Table 3 (VAT penalties). While the full text of the amendment refines penalty amounts and scope, the key takeaway for VAT registrants is that the conditions for penalty imposition on invoice issuance failures (items 4, 5, and 6) now use a per-case-detected basis at AED 2,500 each — creating an aggregation risk for businesses with high transaction volumes that process invoices outside the legally specified period.

General Provisions — Penalties Do Not Discharge the Underlying Tax

Article 3 states explicitly that imposing any administrative penalty does not exempt any person from liability to pay the Due Tax. This is frequently misunderstood. A penalty settlement is not a tax settlement — both must be addressed separately.

How Abdelhamid & Co. Can Help

As a licensed Tax Agent registered with the FTA (TAN: 30003958, TAAN: 20033908), Abdelhamid & Co. assists businesses in understanding their penalty exposure, preparing voluntary disclosures, and building reconsideration or TDRC objection files. The firm operates from Sharjah and serves clients across all UAE emirates.