04 Nov 2025
The UAE has entered into a new phase of corporate responsibility since the adoption of the Federal Decree-Law No. 47 of 2022, on the Taxation of Corporations and Businesses. The FTA has made it clear tax compliance is not a choice and that businesses are required to keep proper records, submit the returns with the proper time and also co-operate with auditors.
The Cabinet Decision No. 75 of 2023, effective from August 2023 (amended by Decision No. 10 of 2024), sets out detailed administrative penalties for corporate tax violations. These penalties directly impact how companies manage their corporate audit processes.
Common Audit Penalties in the UAE 2025
Below are the most common and costly audit-related penalties that businesses in the UAE faced in 2025 — and should avoid repeating in 2026.
1. Failure to Maintain Proper Accounting Records
• AED 10,000 per violation, increasing to AED 20,000 for repeated offenses within 24 months. (as per Table of Violations, Item 1 — Cabinet Decision No. 75 of 2023 on Administrative Penalties for Corporate Tax).
• Applies to entities that do not maintain adequate accounting records, ledgers, and documentation required under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and the Tax Procedures Law (Federal Decree-Law No. 28 of 2022).
• Under Article 78 of the Tax Procedures Law, all taxable persons must retain accounting records, commercial books, invoices, and supporting documentation for at least seven years from the end of the tax period to which they relate. Failure to meet this requirement may not only trigger financial penalties but also expose the entity to a full tax audit and further scrutiny from the FTA.
This remains one of the most frequent FTA audit penalties because incomplete bookkeeping hinders audit verification and tax assessments.
2. Late or Non-Submission of Corporate Tax Returns
• AED 500 per month for the first 12 months of delay.
• AED 1,000 per month from the 13th month onwards.
Delayed filing can trigger further audits and penalties for unpaid taxes. To avoid these, maintain a strict tax calendar and automate return reminders.
3. Failure to Pay Corporate Tax on Time
• A monthly penalty equivalent to 14 per cent per annum is charged on the unpaid corporate tax amount starting the day after the due date of payment (as per Cabinet Decision No. 75 of 2023 – Table of Violations, Item 8).
• This penalty applies for each month or part thereof until the outstanding tax is fully settled. The compounding nature of this penalty means that even short delays can accumulate into significant liabilities.
Determining the Due Date for Payment:
Under Cabinet Decision No. 75 of 2023 (Item 8, Note 2), the due date for settling corporate tax depends on the context:
• For Voluntary Disclosures: Payment must be made within 20 business days from the date of submission of the voluntary disclosure.
• For Tax Assessments issued by the FTA: Payment must be made within 20 business days from the date of receiving the tax assessment notice.
• This penalty can quickly build up and have a severe impact on a company’s cash flow, highlighting the critical importance of timely tax payments and maintaining sufficient liquidity for corporate tax obligations.
4. Incorrect or Incomplete Tax Returns
• AED 500 per return unless corrected before the submission deadline, as per Cabinet Decision No. 75 of 2023 – Table of Violations, Item 9.
• Even minor inaccuracies in reporting taxable income, deductible expenses, or exempt revenues can attract scrutiny from the FTA. When inconsistencies occur repeatedly, they often trigger a tax audit to verify the accuracy of financial statements and corporate tax computations.
Voluntary Disclosure Rule:
Under Article 10 of the Tax Procedures Law (Federal Decree-Law No. 28 of 2022), a taxpayer who discovers an error or omission in a previously filed tax return, tax assessment, or refund application must submit a Voluntary Disclosure (VD) to the FTA to correct the mistake.
• If a voluntary disclosure is submitted before an FTA audit notification, penalties are significantly lower:
• 1% per month on the tax difference, calculated from the original due date of the return until the date of voluntary disclosure submission.
• 15% fixed penalty on the tax difference if the disclosure is submitted after receiving an FTA audit notice or if no disclosure is made before the audit.
• These rules are outlined in Cabinet Decision No. 75 of 2023 – Table of Violations, Items 10 and 11.
• Timely submission of a Voluntary Disclosure demonstrates good faith and can substantially reduce penalty exposure — a crucial compliance measure for businesses aiming to maintain transparency and credibility.
5. Failure to Submit Voluntary Disclosures
• Fixed penalty: 15% of the tax difference.
• Additional penalty: 1% per month on the tax difference until corrected.
These penalties apply when a company identifies an error but fails to disclose it before a voluntary FTA audit notice. This is one of the most serious audit mistakes to avoid in the UAE.
6. Obstructing or Failing to Facilitate an FTA Audit
• AED 20,000 penalty for any taxpayer, legal representative, or tax agent who fails to provide access or assistance to FTA auditors, as per Cabinet Decision No. 75 of 2023 – Table of Violations, Item 12.
Transparency and cooperation during audits are essential. Ignoring requests or withholding information can escalate penalties. This may lead to criminal referral under Articles 74–78 of the Tax Procedures Law (Federal Decree-Law No. 28 of 2022). These articles authorize the FTA to initiate criminal proceedings for acts involving obstruction of justice, falsification of records, or deliberate concealment of tax-related data.
Businesses should, therefore, take every audit request seriously, ensure their records are complete, and cooperate fully with the FTA to avoid administrative penalties and potential legal exposure.
7. Late Corporate Tax Registration
• AED 10,000 for failing to register for corporate tax within the FTA-specified timeframe.
This is one of the most frequently reported UAE corporate tax registration penalties for 2025. Timely registration ensures smooth compliance and avoids retrospective audits.
Understanding Corporate Tax Penalties in the UAE: Lessons from 2025
In 2025, the FTA focused heavily on cross-verifying submitted data with bank records and invoices during corporate audits. Many firms faced heavy corporate tax penalties in the UAE due to:
• Missing supporting documents for expense claims.
• Misclassification of exempt or free-zone income.
• Delays in responding to FTA notices.
Businesses must now go beyond compliance checklists — they must demonstrate audit readiness throughout the year.
Audit Mistakes to Avoid in the UAE: A 2026 Readiness Checklist
Companies ought to also put emphasis on active audit management in a bid to remain ahead of enforcement in 2026. Key steps include:
• Keep digital financial records of not less than seven years. A legal requirement under Article 55 of the Federal Decree-Law No. 47 of 2022 (Corporate Tax Law).
• Filing all corporate taxes correctly and on schedule.
• Although not mandatory, it is recommended to carry out internal audits on a quarterly basis to identify discrepancies.
• React timely to FTA audit reports.
• Review free zone qualifying activities and tax exemptions on a regular basis.
These protective steps work to reduce the potential risk of errors that would come to attract FTA audit penalties and save your reputation with regulators.
FTA Audit Penalties: A Closer Look
FTA enforces fines not only on direct infractions but also on administrative failures including the lateness or absence of deregistration, the lateness or absence of amendments to the tax records, or the non-filing of declarations - all of which can trigger recurring fines under Cabinet Decision No. 75 of 2023 on Administrative Penalties for Corporate Tax Violations.
For instance:
• Failure to update the tax information attracts AED 1,000 per violation, increasing to AED 5,000 for repeated violations within 24 months (Cabinet Decision No. 75 of 2023 – Table of Violations, Item 4).
• Failure to deregister within the stipulated period attracts a fee of AED 1,000 per month, imposed from the first month of delay up to a maximum of AED 10,000 (Cabinet Decision No. 75 of 2023 – Table of Violations, Item 3).
Every penalty category reflects the FTA’s focus on promoting transparency, timeliness, and proper documentation under Cabinet Decision No. 75 of 2023.
Corporate Audit UAE: Why It’s More Than a Legal Requirement
A corporate audit is not just about meeting compliance — it’s about demonstrating financial integrity.
The FTA’s Tax Procedures Law and the Corporate Tax Law empower the Authority to audit any business, inspect financial data, and impose penalties for non-compliance.
Proactive audits help businesses identify issues before regulators do. Companies that implement year-round audit checks are more likely to avoid costly UAE audit penalties in 2025 and safeguard their credibility.
How to Avoid UAE Corporate Tax Penalties 2025
The following is how companies will remain compliant and not penalized in 2026:
• Get registered with FTA in good time and maintain records of taxes.
• Filing of tax returns and declarations on time.
• Balance books prior to submitting.
• Review filings with the assistance of professional audit and tax advisors.
• Send voluntary disclosures on time when mistakes are discovered.
With these steps, you will be able to go a long way in eliminating corporate audit risks exposure within the UAE.
Final Thoughts: Compliance Is Cheaper Than Penalties
The Top Audit Penalties in UAE 2025 is a strong warning to businesses going into 2026. With the UAE tightening its tax collection environment, the best defense is prevention.
Accurate recordkeeping, timely filings, and proactive audits can save your company from thousands of dirhams in fines — and the reputational risk that follows.
Stay Audit-Ready with AMCA Auditing
At AMCA Auditing, we help businesses stay ahead of evolving UAE tax laws. From corporate audit UAE and tax filing assistance to compliance reviews and FTA representation — our experts ensure your business is always audit-ready.
Book your audit consultation today and safeguard your business from UAE audit penalties 2025.
FAQs
Q1. What triggers an FTA audit in the UAE?
Audits are often triggered by inconsistencies in tax returns, late filings, or irregular financial transactions reported to the FTA. The FTA uses a risk-based audit selection system to identify taxpayers with higher probability of errors or evasion. This includes algorithmic profiling that evaluates compliance history, transaction patterns, and industry benchmarks.
The FTA also conducts third-party data cross-checks — comparing information received from banks, government departments, customs, and free zone authorities with corporate tax filings. Any mismatches detected between these data sources and declared figures can automatically trigger a tax audit or field inspection.
Together, these mechanisms ensure that the UAE’s tax enforcement remains data-driven, fair, and targeted, focusing on entities with the highest risk of non-compliance.
Q2. Can penalties be reduced or waived?
Yes, the FTA may grant partial relief or penalty waivers under specific conditions if errors are voluntarily disclosed and promptly corrected.
Q3. How often can the FTA audit a business?
There’s no fixed schedule — the FTA may conduct random or risk-based audits at any time within the statutory limitation period.
Q4. Do free zone companies have exemption to audits?
No. Even qualifying free zone entities are required to keep records, and demonstrate compliance to be able to maintain their exemption status.
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