Voluntary Disclosure penalties in the UAE: why “awareness” should be treated as an element of the violation

The orthodox (table-driven) picture

1. The Cabinet’s penalties tables for the Tax Procedures Law and Corporate Tax Law describe two distinct VD-related violations and two corresponding penalty outcomes.

First, where a taxpayer submits a VD in relation to errors in a tax return, tax assessment, or refund application (pursuant to Article 10(1) and (2) of the Tax Procedures Law), the table prescribes a monthly penalty of 1% on the “Tax Difference”, running from the day after the return due date (or the refund application submission date) until the VD is submitted.

Second, where the taxpayer fails to submit the VD before being notified that it will be subject to a tax audit, the table imposes (i) a fixed 15% penalty on the Tax Difference plus (ii) a monthly 1% penalty. The monthly 1% runs (a) until the VD is eventually submitted if it is submitted after audit notification, or (b) until the FTA issues a tax assessment if no VD is submitted at all.

2. This is the “objective” reading practitioners meet in day-to-day administration: whether the VD was submitted before audit notification largely determines whether the 15% fixed penalty applies.

[1] Violations No. 11 and No. 12 listed in Table 1 annexed to Cabinet Decision No. 40 of 2017 as updated by Cabinet Decision No. 129 of 9 Oct 2025 (Effective from 14 April 2026), applicable to VAT and Excise, and violations No. 10 and No. 11 listed in the Table annexed to Cabinet Decision No. 75 of 10 July 2023, applicable to Corporate Tax.

The statutory trigger: the VD obligation is not free-floating

3. The Tax Procedures Law does not present VD as a general, always-on duty. Article 10 is drafted as a triggered obligation, activated when the taxpayer “becomes aware” that a return (or assessment) is incorrect and that the error resulted in payable tax being less than it should have been (and similarly for an overstated refund claim). In particular:

• Article 10 (1) obliges a taxable person to submit a VD if it becomes aware of an incorrect return or assessment that understated payable tax.
• Article 10 (2) obliges a taxpayer to submit a VD if it becomes aware of an incorrect refund application that overstated the refund.

The “failure to submit VD” penalty is then framed, at the level of the Tax Procedures Law itself, as a penalty for failing to submit a VD “pursuant to Clauses 1 and 2 of Article 10” before audit notification.

This linkage matters: the legislator did not simply penalize “no VD before audit.” It penalized failure to submit a VD that is required under Article 10(1) and (2). And those clauses are activated by awareness.

The 20-business-day window

4. Article 10 of the Executive Regulation adds operational detail to the VD trigger. Where the amount exceeds AED 10,000, the taxable person must submit the VD within 20 business days following the date they become aware of the error.

5. This is conceptually important for penalty analysis. If the compliance duty is “submit within 20 business days of awareness”, then (on a straightforward violation model) the “failure” cannot exist until (i) awareness occurs and (ii) the 20-day period lapses without submission (subject to the regulation’s mechanics for smaller differences).

No penalty without establishing awareness and expiry of the VD window

Elements of the violation, not merely consequences

6. Article 24(1) of the Tax Procedures Law lists the violations for which the FTA issues administrative penalties assessments. Two of those are VD-specific:

• submitting a VD on errors pursuant to Article 10(1) and (2); and
• failing to submit such VD before being notified of audit.

7.But those paragraphs do not operate in a vacuum. Article 24(3) expressly delegates to Cabinet the power to specify penalties “for each of the violations listed in Clause 1 of this Article in respect of this Decree-Law, the Tax Law or any other violation specified under a Cabinet decision”. Submission, late submission and non-submission of a Voluntary Disclosure are themselves violations enumerated in Clause 1, and the Cabinet’s table therefore functions as an instrument for quantifying penalties for those statutory violations, rather than redefining their constituent elements.

8. In other words, the penalty table is subordinate legislation whose function is to price a violation already defined by the primary statute. It is not, in principle, a license to redefine the violation’s elements. If Article 24(1)(l) is linked to “pursuant to Clauses 1 and 2 of Article 10”, and Article 10(1)–(2) are triggered by awareness, then awareness (and non-compliance within the applicable period) should be treated as part of what must be established before the “failure to submit VD” violation is made out.

VD submitted after notice is not automatically a “failure”

9. The Cabinet table treats “VD submitted after audit notification” as a species of “failure to submit before notification,” attracting 15% fixed penalty plus 1% monthly.

10. However, a conceptually different reading is available from the statute-and-regulation architecture:

• If the taxpayer becomes aware only after receiving the audit notification, then the taxpayer could still comply with the Article 10 duty by submitting the VD within 20 business days of that awareness, as required by the Executive Regulation.
• In that situation, it is not self-evident that the taxpayer has “failed” to submit a VD “pursuant to” Article 10(1)–(2) before audit notification, because the Article 10 obligation itself was not triggered before notification.

On this view, the 15% fixed penalty should not be imposed merely because the VD post-dates the audit notice. The decisive question becomes whether the taxpayer was aware before notification and whether the 20-day compliance period had run its course.

The three practical objections

 “The table doesn’t ask about awareness”

11. Items 11 and 12 in the Cabinet table are drafted around submission timing and audit notification, rather than subjective knowledge.

12. But that observation is not the end of the legal analysis. The table’s authority is derivative of Article 24(3), which empowers Cabinet to specify penalties for the violations listed in Article 24(1).

13. If a violation in the primary statute is defined with an embedded cross-reference to Article 10(1)–(2), then the conditions of that cross-reference should be respected when characterizing whether the violation exists in the first place.

“The 1% runs from the return due date even though awareness may arise later”

14. This arguments is also true as a matter of table mechanics. Both penalties compute 1% from the day after the return due date (or refund application submission) until VD submission or until tax assessment issuance.

15. Yet a computation method is not, by itself, a legal refutation of an elements-based reading. Legislatures sometimes choose a proxy start date (the original due date here) for reasons of administrability and deterrence, even if the compliance trigger is framed differently. The question remains whether the violation exists at all without proof that the duty to act had arisen (awareness) and that the duty was not met within the time allowed.

“FTA can argue constructive awareness”

16. In practice, the FTA may assert that the taxpayer “must have known” because it had the records, signed the return, and could have detected the error through reasonable controls.

17. This line of reasoning converts “awareness” from a factual trigger into a largely inferential (and, in practice, presumptive) state of mind. If “constructive awareness” is treated as sufficient in every case, the VD mechanism risks becoming doctrinally redundant: virtually any return error could be reframed as one the taxpayer “was aware of” merely because it held the underlying records and bore responsibility for filing. That approach collapses the distinction between two legally distinct notions:

• the obligation to file a correct return, which may legitimately be assessed against an objective standard of due care (and therefore invites constructive attribution), and
• the separate VD obligation, which is deliberately drafted as a knowledge-triggered corrective duty that arises only once the taxpayer becomes aware of a specific inaccuracy.

18. Put differently, the system already has a conceptual home for constructive standards: they justify penalties for incorrect filing irrespective of actual knowledge, while actual knowledge may aggravate liability (including, potentially, criminal exposure) in appropriate cases. If constructive awareness is then imported wholesale into the VD regime, the “awareness” trigger in Article 10 ceases to perform any meaningful function. One could impose sanctions for the underlying return error without invoking the VD architecture at all, because constructive awareness would exist independently of whether a VD duty was triggered.

19. The more coherent reading is therefore to treat constructive awareness as an evidentiary inference available in exceptional cases, not as an automatic presumption that neutralizes the statutory design whereby VD obligations (and the corresponding “failure to submit” offence) are contingent upon demonstrated awareness.

Practical implications

20. If the awareness-as-element thesis is accepted even partially, then VD penalty disputes become evidence-driven. The key is to build a disciplined timeline:

• Audit notification date (and the precise form of notification).
• First point of detection of the error (internal reconciliation, adviser memo, ERP correction log, correspondence with supplier/customer, etc.).
• Why detection occurred when it did.
• Whether the 20-business-day period from awareness had expired before audit notification.

21. The dispute then crystallizes into a legally legible question: did the taxpayer fail to submit a VD “pursuant to” Article 10(1)–(2) before being notified of audit, or did the Article 10 trigger and its compliance window arise only later?

Conclusion

22. The Cabinet’s VD penalties are easy to apply mechanically, but the Tax Procedures Law’s drafting suggests a deeper structure. Article 10(1)–(2) impose a VD duty only once the taxpayer becomes aware of a relevant inaccuracy, and the Executive Regulation ties compliance to 20 business days from awareness in material cases. Because the “failure to submit VD” violation is expressly linked to Article 10(1)–(2), and because the Cabinet table is authorised to price violations (not redefine them) the more principled view is that the 15% fixed penalty (and, indeed, the characterization of “failure”) should not be imposed unless the FTA can establish that the awareness trigger had been met (and, where relevant, that the VD window had expired) before the taxpayer was notified of the audit.

Disclaimer

Pursuant to the MoF’s press-release issued on 19 May 2023 “a number of posts circulating on social media and other platforms that are issued by private parties, contain inaccurate and unreliable interpretations and analyses of Corporate Tax”.

The Ministry issued a reminder that official sources of information on Federal Taxes in the UAE are the MoF and FTA only. Therefore, analyses that are not based on official publications by the MoF and FTA, or have not been commissioned by them, are unreliable and may contain misleading interpretations of the law. See the full press release here.

You should factor this in when dealing with this article as well. It is not commissioned by the MoF or FTA. The interpretation, conclusions, proposals, surmises, guesswork, etc., it comprises have the status of the author’s opinion only. Furthermore, it is not legal or tax advice. Like any human job, it may contain inaccuracies and mistakes that I have tried my best to avoid. If you find any inaccuracies or errors, please let me know so that I can make corrections.