# Penalty waiver UAE grounds and how to apply to the FTA

> Penalty waiver UAE grounds explained: acceptable reasons, evidence, timelines, and how to apply to the FTA for cancellation or refund of tax

Source: https://einvoicedirect.ae/fta-compliance-uae/penalty-waiver-uae-grounds  
Last updated: 2026-06-05  
Publisher: EInvoice Direct (Massive FZCO), UAE e-invoicing software.

## What are penalty waiver UAE grounds?

Penalty waiver UAE grounds are the specific reasons the Federal Tax Authority (FTA) accepts for cancelling or refunding an administrative tax penalty. They cover situations where the taxpayer was not at fault, such as FTA system errors, force majeure, death or serious illness of the responsible person, or a genuine misinterpretation of the law backed by evidence.

The waiver process sits inside the wider [FTA Compliance UAE](https://einvoicedirect.ae/fta-compliance-uae) framework. It is governed by Cabinet Decision 105 of 2021 on Administrative Penalties Reduction and Exemption, alongside Federal Decree-Law 28 of 2022 on Tax Procedures. Understanding the accepted grounds is the difference between a successful application and a wasted submission.

This guide walks UAE business owners and finance teams through the legal basis, the recognised grounds, the evidence the FTA expects, the time limits, and the practical steps to file a waiver request. It also covers what to do when a waiver is refused.

## Legal basis for tax penalty waivers in the UAE

Two instruments control penalty waivers in the UAE. Federal Decree-Law 28 of 2022 on Tax Procedures gives the FTA the authority to reduce or cancel administrative penalties. Cabinet Decision 105 of 2021 then sets out the exact controls, cases, and procedures.

Under these rules, the FTA can either fully exempt a penalty or partially reduce it. The decision rests with a dedicated committee inside the authority. The taxpayer cannot demand a waiver as a right. The committee weighs the facts, the evidence, and whether the taxpayer cooperated.

### Who can apply

Any taxable person registered with the FTA can apply. This includes Value Added Tax (VAT) registrants, excise tax registrants, and corporate tax registrants. The applicant must have a valid Tax Registration Number (TRN) and an active EmaraTax account.

### What penalties are covered

The waiver mechanism covers administrative penalties only. It does not cover the underlying tax due, interest where applicable, or criminal fines issued through the courts. If you owe AED 50,000 in VAT plus an AED 10,000 late payment penalty, only the AED 10,000 penalty can be waived.

## The accepted grounds for a penalty waiver

Cabinet Decision 105 of 2021 lists the categories the FTA accepts. Each ground requires documentary proof. A request without supporting evidence is almost always refused.

### 1. Death or incapacity of the responsible person

If the natural person responsible for tax obligations dies or becomes seriously incapacitated, the FTA may exempt the resulting penalties. This applies to sole establishments where the owner ran the tax affairs personally, or to companies where a single authorised signatory handled compliance.

Evidence required: death certificate from UAE authorities, medical reports from a licensed UAE hospital, or a court order confirming incapacity. The dates on the documents must match the period when the violation occurred.

### 2. Severe illness affecting tax compliance

A severe and documented illness of the taxpayer or the authorised signatory is a recognised ground. The illness must directly explain why the filing, payment, or other obligation was missed.

Evidence required: detailed medical reports, hospital admission records, and a written statement linking the illness period to the missed deadline.

### 3. FTA system or technical errors

If EmaraTax or another FTA portal failed during the deadline window, the FTA can waive the resulting penalty. This is one of the more straightforward grounds because the FTA has its own logs.

Evidence required: screenshots with visible timestamps, error messages, system reference numbers, and any email correspondence with FTA support during the outage.

### 4. Force majeure and general disasters

Fires, floods, pandemics, and similar events that disrupt business operations qualify. The event must be officially recognised by UAE authorities, such as a Civil Defence incident report.

Evidence required: official incident reports, insurance claims, photographs, and proof that records or systems were physically affected.

### 5. Restrictions on accessing records

Where a court order, criminal investigation, or freeze prevents the taxpayer from accessing accounting records, the FTA may waive penalties for the affected period.

### 6. Bankruptcy or insolvency under UAE law

If a court has formally declared bankruptcy and this prevented compliance, the penalty may be cancelled. A board resolution or a self-declared cash flow problem is not enough.

### 7. Following written FTA guidance later changed

If the taxpayer followed a specific written ruling or public clarification from the FTA, and the FTA later changed its position, penalties on the affected transactions can be waived.

### 8. Errors caused by the FTA itself

Where the violation resulted from an FTA mistake, such as incorrect TRN allocation, wrong tax period setup, or misapplied filings, a waiver is usually granted.

## Grounds the FTA does not accept

Many businesses apply on the wrong basis and lose time. The following are not accepted grounds on their own.

- Lack of awareness of UAE tax law.
- Reliance on an external accountant or tax agent who made a mistake.
- Cash flow problems or general financial difficulty.
- Internal staff turnover or system migration.
- Being a small business or a startup.
- First time offence with no other excuse.

For cash flow issues, the correct route is a [Penalty Instalment Request UAE](https://einvoicedirect.ae/fta-compliance-uae/penalty-instalment-request-uae), not a waiver. The two are separate processes.

## Comparison: waiver, reconsideration, and voluntary disclosure

Taxpayers often confuse these three remedies. They serve different purposes.

| Mechanism | Purpose | Deadline | Outcome |
| --- | --- | --- | --- |
| Penalty waiver | Cancel or reduce a penalty based on accepted grounds | Within 40 business days of becoming aware of the grounds | Full or partial exemption |
| Reconsideration request | Challenge an FTA decision on legal or factual grounds | 40 business days from the decision | Decision upheld, varied, or reversed |
| Voluntary disclosure | Correct a past tax return error before the FTA finds it | 20 business days from discovering the error | Reduced penalty rates apply |

If the FTA decision itself is wrong, file a [FTA Reconsideration Request UAE](https://einvoicedirect.ae/fta-compliance-uae/fta-reconsideration-request-uae) instead. If you discovered a return error, see [Voluntary Disclosure UAE All Taxes](https://einvoicedirect.ae/fta-compliance-uae/voluntary-disclosure-uae-all-taxes) and the specific rules in [Voluntary Disclosure UAE Timing](https://einvoicedirect.ae/fta-compliance-uae/voluntary-disclosure-uae-timing).

## Time limits and procedure

The waiver request must reach the FTA within 40 business days from the date the taxpayer becomes aware of the grounds. For deaths and force majeure, the clock starts from the event. For FTA system errors, it starts from the failed transaction.

### Step by step

- Log into EmaraTax with the registered TRN.
- Open the Penalty Reduction or Exemption form under the relevant tax type.
- Select the penalty entries to be reviewed.
- Choose the applicable ground from the list.
- Upload the supporting evidence as a single indexed PDF.
- Submit a written justification in Arabic or English, signed by the authorised signatory.
- Pay the underlying tax due, if any, before submission.

### How long the FTA takes to decide

The FTA aims to decide within 40 business days. The committee may extend this by another 40 business days and must notify the taxpayer. Decisions arrive through EmaraTax and the registered email.

## Evidence checklist by ground

| Ground | Primary evidence | Supporting evidence |
| --- | --- | --- |
| Death | UAE death certificate | Power of attorney for the new signatory |
| Severe illness | Hospital report dated to the period | Treating doctor statement |
| System error | Screenshot with timestamp | FTA support ticket reference |
| Force majeure | Civil Defence or police report | Insurance claim, photos |
| Bankruptcy | Court order | Trustee appointment letter |
| FTA written guidance | Copy of the original ruling | Transactions affected, dated |

## If the waiver is refused

A refusal is not the end of the road. The taxpayer can escalate.

### Step 1: Reconsideration

File a reconsideration request within 40 business days of the refusal. This goes to a different FTA committee that reviews the file fresh.

### Step 2: Tax Dispute Resolution Committee

If reconsideration also fails, the next stop is the [UAE Tax Dispute Resolution Committee](https://einvoicedirect.ae/fta-compliance-uae/uae-tax-dispute-resolution-committee). The objection must be filed within 40 business days, and any undisputed tax must be settled first.

### Step 3: Federal Court

If the committee rules against the taxpayer, the case can move to the federal courts. See [UAE Tax Court Procedures](https://einvoicedirect.ae/fta-compliance-uae/uae-tax-court-procedures) for the litigation timeline and prerequisites.

## Practical tips that improve approval odds

- File early. Waiting close to the 40 business day cut-off looks careless.
- One ground per submission. Mixing grounds dilutes the argument.
- Translate evidence into Arabic if the original is in another language other than English.
- Reference the exact article of Cabinet Decision 105 of 2021 that applies.
- Settle the underlying tax before applying. The FTA does not waive penalties on unpaid tax.
- Use a registered tax agent if the amounts are significant. Their submission carries weight.

## Worked example

A Dubai trading company missed its VAT return deadline on 28 February because its finance manager was admitted to hospital on 20 February with a documented cardiac event. The FTA issued a late filing penalty of AED 1,000 and a late payment penalty of 2% on the unpaid tax.

The company files a waiver request on 15 March. It attaches the hospital admission record, the discharge summary dated 5 March, a board resolution confirming the manager was the sole authorised filer, and proof that the VAT was paid in full on 6 March. The company cites Cabinet Decision 105 of 2021 on the ground of severe illness of the responsible person.

The FTA committee reviews and grants a full waiver of the late filing penalty and the percentage-based late payment penalty for the affected period. Total saved: the full administrative penalty amount. The underlying VAT remained payable and was already settled.

## Common mistakes that sink applications

- Submitting after the 40 business day window with no explanation for the delay.
- Generic medical letters that do not name the taxpayer or the period.
- Claiming force majeure for events that did not affect the business location.
- Asking for waiver of penalties on returns that were never filed.
- Repeating the same ground after a prior refusal, with no new evidence.

For broader compliance planning across VAT, excise, and corporate tax, return to the [FTA Compliance UAE](https://einvoicedirect.ae/fta-compliance-uae) hub.

## Useful official sources

Always check the latest text on the FTA and MoF portals before filing. Rules are updated, and Cabinet Decisions can be amended.

- [UAE Federal Tax Authority](https://tax.gov.ae)
- [UAE Ministry of Finance](https://mof.gov.ae)

If your business is preparing for the 2027 e-invoicing mandate and wants compliance built in from day one, including an accredited service provider at no extra charge, [get UAE e-invoicing pricing](https://einvoicedirect.ae/for-businesses#contact) from EInvoice Direct.

## Frequently asked questions

### What are the accepted grounds for a tax penalty waiver in the UAE?

The FTA accepts eight main grounds under Cabinet Decision 105 of 2021: death or incapacity of the responsible person, severe documented illness, FTA system errors, force majeure, restrictions on accessing records, court-declared bankruptcy, following FTA written guidance that later changed, and errors caused by the FTA itself. Each ground requires supporting documentary evidence to be considered.

### How long do I have to apply for a penalty waiver in the UAE?

You must submit your waiver request within 40 business days from the date you became aware of the grounds. For deaths or force majeure events the clock starts at the event. For FTA system errors it starts at the failed transaction. Late submissions are generally refused unless you can justify the delay with separate evidence.

### Can I get a UAE tax penalty waived because of cash flow problems?

No. Cash flow difficulty is not an accepted ground for a penalty waiver under Cabinet Decision 105 of 2021. The correct route for financial hardship is a penalty instalment request, which lets you pay the penalty over time rather than have it cancelled. The waiver and instalment processes are separate and require different applications.

### How long does the FTA take to decide a waiver request?

The FTA aims to issue a decision within 40 business days of receiving the complete application. The committee can extend this period by a further 40 business days but must notify you of the extension. Decisions are delivered through your EmaraTax account and the email address registered against your Tax Registration Number.

### What happens if my UAE penalty waiver is refused?

You have 40 business days to file a reconsideration request, which sends the file to a different FTA committee. If that also fails, you can escalate to the Tax Dispute Resolution Committee within 40 business days, provided any undisputed tax is settled. The final stage is the federal courts, governed by published tax litigation procedures.

### Do I need a tax agent to apply for a penalty waiver?

No. Any taxable person with an active EmaraTax account can apply directly. However, for larger penalties or complex grounds such as force majeure or reliance on FTA guidance, a registered UAE tax agent often improves approval odds. The agent can draft the legal arguments and present evidence in the format the FTA committee expects.

### Can corporate tax penalties be waived in the UAE?

Yes. Cabinet Decision 105 of 2021 and Federal Decree-Law 28 of 2022 on Tax Procedures cover all federal taxes administered by the FTA, including corporate tax under Federal Decree-Law 47 of 2022, VAT, and excise tax. The same accepted grounds and 40 business day deadline apply. Evidence must link the ground to the specific corporate tax filing or payment that was missed.

### Does paying the tax first help my waiver request?

Yes. The FTA does not waive administrative penalties while the underlying tax remains unpaid. Settling the principal tax before or alongside your submission signals cooperation and removes a common reason for refusal. Pay through EmaraTax, keep the payment reference, and include it in your waiver application so the committee can see compliance is now in order.


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