Category: Tax

The United Arab Emirates (UAE) has transitioned from a largely tax-free environment to a jurisdiction aligned with global standards, most notably through the introduction of a federal Corporate Tax (CT) regime. This shift is crucial for multinational entities operating or planning to establish a presence in the Federation.

Read more: Global Tax Guide to Doing Business in the UAE

Legal System
The UAE operates a Civil Law system, which means its legal framework is based on codified laws and statutes rather than judicial precedent. It is influenced by Islamic Sharia principles, particularly in personal matters and certain aspects of commercial law. The UAE has both a Federal court system and autonomous judicial systems in certain financial free zones, such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). These financial Free Zones utilize a distinct Common Law system, complete with English-language courts and independent regulatory bodies, offering an alternative legal framework for international finance and dispute resolution.
Taxation Authorities
Taxation is governed at the federal level. The two main authorities are:

1. The Federal Tax Authority (FTA): This is the principal body responsible for the administration, collection, and enforcement of all federal taxes, including Corporate Tax (CT), Value Added Tax (VAT), and Excise Tax. Businesses register with the FTA and file tax returns through its portal.
2. The Ministry of Finance (MoF): The MoF is responsible for drafting tax legislation, issuing Cabinet Decisions, and representing the UAE in international forums, including negotiating and implementing Double Taxation Treaties (DTTs).
   Business Vehicles
   Foreign companies typically structure their operations in the UAE using three primary entities:

• Mainland Limited Liability Company (LLC): This is the most common entity for trading activities within the UAE market. Recent legislative reforms have largely eliminated the mandatory requirement for a local partner in many sectors, allowing for up to 100% foreign ownership of an LLC.
• Free Zone Entity: The UAE hosts numerous Free Zones (special economic areas) that offer specific benefits, primarily 100% foreign ownership and the ability to repatriate all capital and profits. These entities are within the scope of Corporate Tax but may benefit from a 0% rate on qualifying income.
• Branch or Representative Office: These are considered an extension of the foreign parent company and are taxed as a Permanent Establishment (PE) in the UAE on locally sourced income.
  Financing a Corporate Subsidiary
  Financing a UAE-based subsidiary, typically through inter-company loans, is subject to strict compliance under the new Corporate Tax law, specifically concerning Transfer Pricing (TP) rules. The law adheres to the Arm’s Length Principle, requiring that the terms (including the interest rate) of related-party debt be consistent with what independent parties would agree to.
  Furthermore, the deduction of net interest expense is limited to 30% of the company’s Adjusted Taxable Income (an EBITDA-equivalent measure). This restriction aims to prevent excessive debt-loading within the UAE entity to shift profits out of the country.
  Corporate Tax (CT)
  The UAE introduced a federal CT regime (Federal Decree-Law No. 47 of 2022) effective for financial years commencing on or after June 1, 2023.
  The CT regime features a competitive dual-rate structure designed to support small and medium-sized enterprises (SMEs) while meeting international obligations:

1. 0% Rate: Applied to taxable income (profit) up to AED 375,000 (approximately US$102,000).
2. 9% Rate: Applied to taxable income exceeding AED 375,000.
3. Large Multinational Enterprises (MNEs): A different, currently unspecified, rate (expected to be 15%) will apply to large MNEs that meet the criteria for the OECD Pillar Two global minimum tax.
   Free Zone Taxation: Entities that qualify as a Qualifying Free Zone Person (QFZP) benefit from a 0% CT rate on their Qualifying Income. This zero-rate typically covers income derived from transactions with foreign parties or with other Free Zone entities, provided the QFZP maintains adequate substance.
   Cross-Border Payments
   The UAE maintains a favorable tax environment for cross-border transactions:

• Withholding Tax (WHT): The UAE currently imposes no domestic WHT on most payments made to non-residents, including dividends, interest, royalties, and service fees. This provides a significant advantage for multinational groups structuring their cash flows through the UAE.
• Transfer Pricing: While WHT is zero, the inter-company payments for services, royalties, or interest must still comply with Transfer Pricing documentation rules to ensure the payment amount is commercially justifiable at arm’s length.
  Payroll Taxes
  The UAE tax system is exceptionally simple for individual employees:
• Personal Income Tax: The UAE does not levy any personal income tax on wages, salaries, or other emoluments earned by employees.
• Social Security: While expatriate employees do not contribute to a mandatory payroll tax, employers are legally required to make mandatory contributions to a social security scheme for their UAE and GCC national employees only.
  Indirect Taxes
  Indirect taxes in the UAE primarily consist of VAT and Excise Tax, generating a substantial portion of the federal budget.
• Value Added Tax (VAT): Implemented in 2018, VAT is levied on most goods and services. The standard rate is 5%.
• Specific sectors and supplies, such as international transport, certain education and healthcare services, and exports, are subject to a 0% rate.
• Certain services, like specific financial services and residential property rentals, are exempt from VAT.
• Excise Tax: This tax applies to specific goods deemed harmful to human health or the environment. The rates are 50% for carbonated and sweetened drinks, and 100% for tobacco and tobacco products, electronic smoking devices, and energy drinks.

The United Arab Emirates (UAE) has transitioned from a largely tax-free environment to a jurisdiction aligned with global standards, most notably through the introduction of a federal Corporate Tax (CT) regime. This shift is crucial for multinational entities operating or planning to establish a presence in the Federation.

Read more: Global Tax Guide to Doing Business in the UAE

Legal System
The UAE operates a Civil Law system, which means its legal framework is based on codified laws and statutes rather than judicial precedent. It is influenced by Islamic Sharia principles, particularly in personal matters and certain aspects of commercial law. The UAE has both a Federal court system and autonomous judicial systems in certain financial free zones, such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). These financial Free Zones utilize a distinct Common Law system, complete with English-language courts and independent regulatory bodies, offering an alternative legal framework for international finance and dispute resolution.
Taxation Authorities
Taxation is governed at the federal level. The two main authorities are:

1. The Federal Tax Authority (FTA): This is the principal body responsible for the administration, collection, and enforcement of all federal taxes, including Corporate Tax (CT), Value Added Tax (VAT), and Excise Tax. Businesses register with the FTA and file tax returns through its portal.
2. The Ministry of Finance (MoF): The MoF is responsible for drafting tax legislation, issuing Cabinet Decisions, and representing the UAE in international forums, including negotiating and implementing Double Taxation Treaties (DTTs).
   Business Vehicles
   Foreign companies typically structure their operations in the UAE using three primary entities:

• Mainland Limited Liability Company (LLC): This is the most common entity for trading activities within the UAE market. Recent legislative reforms have largely eliminated the mandatory requirement for a local partner in many sectors, allowing for up to 100% foreign ownership of an LLC.
• Free Zone Entity: The UAE hosts numerous Free Zones (special economic areas) that offer specific benefits, primarily 100% foreign ownership and the ability to repatriate all capital and profits. These entities are within the scope of Corporate Tax but may benefit from a 0% rate on qualifying income.
• Branch or Representative Office: These are considered an extension of the foreign parent company and are taxed as a Permanent Establishment (PE) in the UAE on locally sourced income.
  Financing a Corporate Subsidiary
  Financing a UAE-based subsidiary, typically through inter-company loans, is subject to strict compliance under the new Corporate Tax law, specifically concerning Transfer Pricing (TP) rules. The law adheres to the Arm’s Length Principle, requiring that the terms (including the interest rate) of related-party debt be consistent with what independent parties would agree to.
  Furthermore, the deduction of net interest expense is limited to 30% of the company’s Adjusted Taxable Income (an EBITDA-equivalent measure). This restriction aims to prevent excessive debt-loading within the UAE entity to shift profits out of the country.
  Corporate Tax (CT)
  The UAE introduced a federal CT regime (Federal Decree-Law No. 47 of 2022) effective for financial years commencing on or after June 1, 2023.
  The CT regime features a competitive dual-rate structure designed to support small and medium-sized enterprises (SMEs) while meeting international obligations:

1. 0% Rate: Applied to taxable income (profit) up to AED 375,000 (approximately US$102,000).
2. 9% Rate: Applied to taxable income exceeding AED 375,000.
3. Large Multinational Enterprises (MNEs): A different, currently unspecified, rate (expected to be 15%) will apply to large MNEs that meet the criteria for the OECD Pillar Two global minimum tax.
   Free Zone Taxation: Entities that qualify as a Qualifying Free Zone Person (QFZP) benefit from a 0% CT rate on their Qualifying Income. This zero-rate typically covers income derived from transactions with foreign parties or with other Free Zone entities, provided the QFZP maintains adequate substance.
   Cross-Border Payments
   The UAE maintains a favorable tax environment for cross-border transactions:

• Withholding Tax (WHT): The UAE currently imposes no domestic WHT on most payments made to non-residents, including dividends, interest, royalties, and service fees. This provides a significant advantage for multinational groups structuring their cash flows through the UAE.
• Transfer Pricing: While WHT is zero, the inter-company payments for services, royalties, or interest must still comply with Transfer Pricing documentation rules to ensure the payment amount is commercially justifiable at arm’s length.
  Payroll Taxes
  The UAE tax system is exceptionally simple for individual employees:
• Personal Income Tax: The UAE does not levy any personal income tax on wages, salaries, or other emoluments earned by employees.
• Social Security: While expatriate employees do not contribute to a mandatory payroll tax, employers are legally required to make mandatory contributions to a social security scheme for their UAE and GCC national employees only.
  Indirect Taxes
  Indirect taxes in the UAE primarily consist of VAT and Excise Tax, generating a substantial portion of the federal budget.
• Value Added Tax (VAT): Implemented in 2018, VAT is levied on most goods and services. The standard rate is 5%.
• Specific sectors and supplies, such as international transport, certain education and healthcare services, and exports, are subject to a 0% rate.
• Certain services, like specific financial services and residential property rentals, are exempt from VAT.
• Excise Tax: This tax applies to specific goods deemed harmful to human health or the environment. The rates are 50% for carbonated and sweetened drinks, and 100% for tobacco and tobacco products, electronic smoking devices, and energy drinks.

The Federal Tax Authority (FTA) has issued Public Clarification VATP043 (replacing VATP032) to provide essential guidance on the updated Reverse Charge Mechanism (RCM) for transactions involving precious goods in the UAE. This clarification follows Cabinet Decision No. 127 of 2024, which significantly expanded the scope of RCM, effective from February 26, 2025.

Read more: Reverse Charge Redefined: FTA Clarifies Scope Expansion for Precious Goods

This shift is more than a technical update; it’s a strategic move to secure VAT collection, streamline cash flow for VAT-registered businesses, and combat potential fraud in the high-value precious metals and stones sector.
The New Scope: Broader Than Ever
The previous RCM largely focused on domestic supplies of gold and diamonds. VATP043 confirms the sweeping expansion introduced by the Cabinet Decision, bringing a much wider range of high-value commodities under the mechanism.
The scope of Precious Metals now includes Gold, Silver, Platinum, and Palladium. Furthermore, the definition of Precious Stones has been expanded significantly to cover natural and synthetic diamonds, Pearls, Rubies, Sapphires, and Emeralds. The RCM also applies to Jewelry made from these materials, provided the value of the precious components exceeds the value of other components used in the piece.
This comprehensive expansion means that a significant portion of the business-to-business (B2B) trade in luxury and industrial precious materials now falls under the RCM, fundamentally changing how suppliers and buyers handle VAT in these transactions.
Compliance Hinges on Documentation
The core operational burden of the expanded RCM falls heavily on documentation and verification. VATP043 clearly outlines the strict conditions that both the supplier and the recipient must satisfy for the RCM to apply to a B2B transaction:

1. Recipient is VAT-Registered: The buyer must be registered for VAT in the UAE.
2. Intent of Use: The buyer must intend to either resell the precious goods or use them in the production or manufacture of other precious goods.
3. Mandatory Declaration: The recipient must provide the supplier with a written declaration confirming both their VAT registration status and their intent of use before the date of supply.
   Crucially, the supplier must receive and verify the recipient’s declaration. If these conditions are not met, the supplier is obligated to charge and remit standard 5% VAT, shifting the liability and cash flow impact back to the traditional method.
   The Critical Clarification on ‘Making Services’
   One of the most valuable aspects of VATP043 is the guidance provided on making services (such as charges for assembly, cutting, or manufacturing jewelry).
   The FTA clarifies that the RCM applies only to the supply of the Precious Goods themselves, and not generally to the services used to modify them. However, an exception exists:

• If the supplier charges a single composite price for the precious goods and the making service, and the making service is incidental and inseparable from the supply of the goods, the entire transaction may be treated as a single composite supply subject to the RCM.
• If the making charges are separately invoiced, the service component remains subject to standard 5% VAT, even if the goods component is covered by RCM.
  This clarification is vital for manufacturers and jewelers who often combine the sale of materials with a service fee, requiring businesses to meticulously review their invoicing practices.
  Key Takeaway for Businesses
  VATP043, coupled with the Cabinet Decision, confirms that the UAE is actively strengthening its VAT controls in high-risk sectors. For businesses trading in precious materials, proactive compliance is non-negotiable:
• Systems Update: Update all Enterprise Resource Planning (ERP) and accounting systems to correctly apply RCM to the expanded list of goods, effective February 26, 2025.
• Training & Verification: Ensure sales and compliance teams are fully trained on the mandatory written declaration requirement and the process for verifying the recipient’s VAT registration number (TRN) via FTA tools.
• Invoicing Precision: Clearly define and separate charges for goods versus services to ensure the correct VAT treatment is applied, especially in composite supplies.
  This expansion offers a cash flow advantage and simplified compliance for compliant businesses, but non-compliance—particularly regarding documentation—will expose the supplier to the risk of becoming jointly liable for the uncollected VAT.

The UAE tax system has witnessed a crucial settlement of a core dispute regarding the application of the administrative penalties cap. The Federal Supreme Court (FSC) has issued a significant judgment clarifying how the maximum limit for penalties is calculated, setting a new course for the Federal Tax Authority (FTA) and all taxable persons.

Read more: UAE Tax Penalties: FSC Confirms the 200% Cap Applies Per Breach, Not Per Assessment

The controversy centered on how to interpret the statutory maximum penalty of 200% of the tax amount: Does this cap apply to the total penalties imposed in a single assessment, or to each penalty individually?
The Legal Provision in Question
The disagreement stems from the interpretation of Article 24(4) of the Federal Decree-Law No. 28 of 2022 on Tax Procedures, which stipulates: “The amount of any Administrative Penalty shall not exceed two times the amount of Tax in respect of which the Administrative Penalties Assessment was issued.”

While the text aims to cap the total penalties imposed in connection with a specific amount of tax, it did not explicitly define whether this limit applies to the individual penalty or the aggregate amount contained in the assessment.
The Conflicting Interpretations
Lower courts were faced with two opposing interpretations of the text, each carrying major financial implications:

1. The Taxpayer’s Position: The Cap Applies to the Entire Assessment
   The taxpayer, in the case before the FSC, argued that the text refers to the “Administrative Penalties Assessment” as one document. Therefore, the total sum of administrative penalties imposed for related violations should not exceed double (200%) the total amount of the underlying tax assessed. This interpretation aimed to limit the accumulation of penalties resulting from multiple breaches.
2. The FTA’s Position: The Cap Applies to Each Penalty
   The Federal Tax Authority maintained the opposite view, arguing that Article 24(4) should be read to limit each individual administrative penalty. Since each penalty is calculated based on the specific violation it relates to, the legal requirement is met as long as each separate penalty does not exceed 200% of the tax amount that triggered it, even if the total penalties surpass that threshold when aggregated.
   The Federal Supreme Court’s Ruling: Cap Applies Per Penalty
   In its judgment issued on 23 April 2025 in Administrative Appeal No. 337 of 2025 (Tax), the Federal Supreme Court agreed with the FTA, confirming that the 200% cap applies to each penalty independently, and not to the aggregate penalties within the assessment.
   The Supreme Court confirmed in its judgment: “Each penalty, individually and specifically, must not exceed double [the tax amount].”

The Court focused on the literal and grammatical structure of the law, interpreting the phrase “any Administrative Penalty” to mean each specific penalty. This stance settles the debate and leaves little room for alternative interpretations.
Implications for Taxpayers and Compliance
While the decision ultimately ruled against the taxpayer in this specific case, it establishes a defined legal principle and has immediate practical consequences:

1. Constraints on Challenging Total Amounts: Taxpayers may no longer successfully argue that the total amount of penalties in an assessment must be limited to 200% of the overall tax. Future challenges must demonstrate that a specific, individual penalty exceeded its legal maximum.
2. Increased Importance of Compliance: Given that each breach (even minor or repeated errors) can now generate a separate penalty of up to 200% of the associated tax, taxpayers must be even more meticulous with administrative requirements. Maintaining accurate records, meeting deadlines, and full compliance are now paramount to avoid the cumulative accumulation of significant liabilities.
   The FSC’s ruling reinforces the principle of proportionality, where each penalty must be calibrated against its associated tax obligation. This judgment is a defining moment for the UAE tax penalties regime and necessitates that all taxable persons re-evaluate their compliance strategies.

In the rapidly evolving tax landscape of the UAE, a critical legal debate has emerged concerning the precise moment a taxpayer can escalate a dispute from the administrative level to the courts. This issue centers on the statutory deadline for the Tax Disputes Resolution Committee (TDRC), a body with quasi-judicial authority, to issue its decision.

Read more: A Procedural Conundrum: Federal Supreme Court Weighs In on UAE Tax Dispute Deadlines

The tension lies between the explicit statutory timelines designed to ensure swift resolution and the judicial tendency to prioritize a complete administrative decision as the basis for a court appeal. A recent ruling from the Federal Supreme Court (FSC) has provided necessary, though nuanced, guidance on how to interpret this procedural bottleneck.
The Procedural Bottleneck: Deadlines and the Right to Appeal
The conflict arises from the deadlines stipulated in the Federal Decree-Law No. 28 of 2022 on Tax Procedures.

• The Clock Starts: The TDRC is required to decide on objections within 20 business days from receipt, extendable by up to 60 additional business days.
• The Path to Court: Article 36(1) of the Tax Procedures Law allows a taxpayer to appeal the case to the competent court within 40 business days in two specific scenarios:

1. Full or partial objection to the TDRC’s decision.
2. Non-issuance of a decision by the TDRC.
   The core interpretative challenge is determining when the TDRC’s inaction (or “silence”) constitutes a “non-issuance” under Article 36(1)(b), thereby triggering the taxpayer’s 40-day appeal window.
   The Federal Supreme Court’s View: Prioritizing the Decision
   In a pivotal judgment (No. 388 of 2024, issued on 14 May 2025), the Federal Supreme Court (FSC) weighed in, reinforcing the TDRC’s quasi-judicial role and emphasizing that its final decision must form the subject of subsequent judicial review.
   The FSC held that:

• Appeals to court should generally be based on a final decision from the TDRC.
• The TDRC has the discretion to extend its decision period when necessary, and the statutory timeframes are to be understood in a procedural and organizational manner.
  In the specific case reviewed, the FSC concluded that initiating an appeal prior to the issuance of a decision by the TDRC was premature. This decision suggests a judicial tendency to allow the TDRC to retain jurisdiction beyond the prescribed deadlines unless and until a formal decision is eventually issued.
  The Contrast: Silence as Rejection
  The FSC’s approach stands in contrast to the principle of “implicit rejection,” which is often applied in administrative law and is explicitly defined in specific tax dispute contexts:
• TDRC Retains Jurisdiction (FSC Trend): This interpretation generally requires the taxpayer to wait for the TDRC’s decision, even if delayed. The inherent risk is that the taxpayer could lose the 40-day appeal window if the TDRC issues a delayed decision and the taxpayer fails to monitor the status closely.
• Silence as Implicit Rejection (Specific Disputes): Cabinet Decision No. 12 of 2025, which governs tax disputes involving government entities, explicitly states that the TDRC’s failure to issue a decision within the timeframe is to be treated as an implicit rejection, providing clear procedural grounds for escalation—a clarity that is currently missing from the general tax dispute framework.
  This distinction highlights the importance of contextual legal interpretation and the procedural risks involved in prematurely appealing a case where the TDRC’s jurisdiction may still be deemed ongoing.
  Strategic Implications for Taxpayers
  The FSC ruling reinforces the importance of procedural rigor. While Article 36(1)(b) remains a legal avenue for appeal in cases of non-issuance, its application must be strategically evaluated.
  Taxpayers facing delays must:
• Weigh the Risks: Balance the risk of filing a premature appeal (and having it dismissed) against the risk of waiting too long (and losing the 40-day window after a delayed decision is finally issued).
• Monitor Status: Closely track the objection status via the TDRC Electronic Portal.
• Seek Counsel: Given the highly technical interpretation of procedural law, expert legal counsel is essential to avoid procedural pitfalls that could affect the admissibility and ultimate success of the case.
  The FSC’s guidance ensures the judicial review process is built upon a definitive TDRC decision. However, until the law explicitly defines the procedural effect of TDRC inaction in all disputes, taxpayers must navigate this grey area with strategic foresight and caution.

The United Arab Emirates (UAE) has announced a significant evolution of its Excise Tax regime for sugar-sweetened beverages (SSBs), transitioning away from a flat-rate model to a tiered-volumetric system. Effective January 1, 2026, the tax amount will be directly proportional to the actual sugar content of the drink, marking a major policy change aimed at incentivizing healthier consumption and production habits.

Read more: Sweetener Shift: UAE Overhauls Excise Tax on Beverages to Link Rates to Sugar Content

A Move Away from the Flat Rate Since its introduction, the UAE’s Excise Tax on sweetened drinks has been applied at a flat rate of 50%, based on the retail price. This ad-valorem model treated a product with minimal added sugar the same as one with exceptionally high sugar content, offering little financial incentive for manufacturers to reduce sugar levels.
Under the new framework, championed by the Ministry of Finance (MOF) and the Federal Tax Authority (FTA), the calculation method will shift:

• Old Model: 50% of the retail price, regardless of sugar amount.
• New Model: A tiered, volume-based tax (per litre) determined by the grams of sugar or other sweeteners per 100 millilitres (ml) of the beverage.
  The higher the sugar concentration, the higher the tax rate applied. The specific tax rates for each tier are expected to be set by a forthcoming Cabinet Decision, but the general principle is clear: more sugar equals more tax.
  Key Features of the New Tiered System
  The reform, which aligns the UAE with the unified approach adopted by the Gulf Cooperation Council (GCC), brings several critical changes for businesses and consumers:

1. Tiered Structure: The new system introduces graduated tax brackets, likely to include categories such as:

• High Sugar: Products with a specified high concentration (e.g., \bm{\ge 8} grams per 100 ml).
• Moderate Sugar: Products falling between the high and low thresholds.
• Low Sugar: Products below a minimal threshold (e.g., \bm{< 5} grams per 100 ml).

1. Incentive for Reformulation: The financial penalty for high-sugar products creates a strong incentive for manufacturers to reformulate their beverages, potentially leading to lower prices for healthier, low-sugar options.
2. Exclusions and Redefinitions:

• Artificial Sweeteners: Drinks containing only artificial sweeteners and no added sugar are expected to be exempt from the tax (a 0% rate).
• Natural Sugar: Drinks containing only naturally occurring sugar (like 100% fruit juices without added sweeteners) remain outside the scope of the Excise Tax.
• Carbonated Drinks: These will no longer be treated as a separate excise category but will fall under the new Sweetened Drinks definition, with their tax liability determined solely by their sugar content.
  Preparing for the 2026 Implementation
  The FTA has issued public clarifications (such as EXTP012) to give businesses sufficient lead time to prepare for the January 1, 2026, effective date. The transition presents significant compliance challenges that require proactive measures:
• Product Reassessment: Businesses must conduct comprehensive laboratory analysis and verification of the sugar content for their entire beverage portfolio to accurately determine the tax band for each product.
• System Upgrades: Internal enterprise resource planning (ERP), accounting, and pricing systems must be upgraded to handle the new tiered-volumetric calculations, replacing the old ad-valorem methodology.
• Documentation and Reporting: Taxable persons will be required to maintain meticulous records and documentation to substantiate the sugar content reported to the FTA.
• Stock Transition: The MOF has indicated that a mechanism will be introduced to allow importers and producers who paid the old 50% tax on unsold goods to claim a deduction if their products fall into a lower tax tier under the new system, ensuring fairness during the transition.
  Ultimately, this reform reflects the UAE’s twin commitments: to maintaining a flexible and effective tax system aligned with international best practices, and to promoting public health by reducing sugar consumption and combating diseases like obesity and diabetes. For the beverage industry, the new year will bring a decisive shift where every gram of sugar has a measurable financial impact.

The United Arab Emirates (UAE) has taken a decisive step toward fully digitalizing its tax administration with the release of new Ministerial Decisions and amendments to the VAT Executive Regulation. These legislative updates confirm the scope, phased implementation timeline, and key compliance requirements for the nation’s new Electronic Invoicing System (EIS).
The changes signal a transformative shift toward a standardized, real-time digital reporting model, aligning the UAE with global best practices for tax compliance.
Key Legislative Updates
On September 29, 2025, the Ministry of Finance (MoF) issued Ministerial Decisions No. 243 and 244 of 2025, clarifying the operational framework for the EIS. Concurrently, Cabinet Decision No. 100 of 2025 amended Articles 59 (Tax Invoices) and 60 (Tax Credit Notes) of the VAT Executive Regulations, setting the stage for the mandatory adoption of e-invoicing.

1. Scope of Application (Ministerial Decision No. 243)
   The e-invoicing system applies to all Business-to-Business (B2B) and Business-to-Government (B2G) transactions conducted by persons operating in the UAE.
   Inclusions and Exclusions:

• Included: All B2B and B2G transactions.
• Excluded: Business-to-Consumer (B2C) transactions (until further notice) and transactions related to the sovereign activities of government entities.
  Mandatory Use of Accredited Service Providers (ASPs):
• Both the issuer and the recipient of an electronic invoice or credit note are required to appoint a Ministry-accredited Accredited Service Provider (ASP). The ASPs will be critical for ensuring the invoices are validated, compliant, and transmitted securely through the system.
• All e-invoices and e-credit notes must contain the full set of data fields as prescribed by the FTA’s technical specifications and must be stored securely within the UAE.

1. Amendments to the VAT Executive Regulation (Cabinet Decision No. 100)
   The amendments to the VAT Executive Regulation (Cabinet Decision No. 52 of 2017, as amended) eliminate previous flexibilities and standardize compliance for the digital era:

• Elimination of Simplified Invoices: The concept of simplified invoices (for supplies below AED 10,000) is eliminated. All e-invoices must now be full, structured tax documents.
• Mandatory E-Invoicing for Zero-Rated Supplies: Issuing a full tax invoice for wholly zero-rated supplies (e.g., direct exports) is now mandatory, ensuring a complete and auditable digital trail.
• Tax Credit Notes: Credit notes must be issued electronically and comply with the full e-invoicing data schema.
• Input Tax Recovery: A new condition for input VAT recovery requires the taxable person to retain the tax invoice in the specified electronic format.
  Phased Implementation Timeline (Ministerial Decision No. 244)
  The EIS will be rolled out in a structured, phased approach, with deadlines staggered based on a business’s annual revenue. Voluntary adoption of the system is open to any business starting from July 1, 2026.
  Key Implementation Deadlines:
• Pilot Program: The system will commence with a pilot program for a selected Taxpayer Working Group starting July 1, 2026.
• Phase 1: Large Businesses (Annual Revenue equal or more than AED 50 Million)
• ASP Appointment Deadline: July 31, 2026
• Mandatory E-Invoicing Deadline: January 1, 2027
• Phase 2: Other Businesses (Annual Revenue less than AED 50 Million)
• ASP Appointment Deadline: March 31, 2027
• Mandatory E-Invoicing Deadline: July 1, 2027
• Phase 3: All UAE Government Entities
• ASP Appointment Deadline: March 31, 2027
• Mandatory E-Invoicing Deadline: October 1, 2027
  A Decentralized, Secure Model
  The UAE’s system adopts a decentralized 5-Corner Continuous Transaction Control and Exchange (DCTCE) model, which is based on the international Peppol network standard. This model enhances security and data integrity by requiring all transactions to pass through an Accredited Service Provider (ASP). The ASP validates the data, transmits it securely to the recipient’s ASP, and reports key information to the Federal Tax Authority (FTA) in near real-time, creating an immediate and secure audit trail.
  Call to Action for Businesses
  The legislative foundation for the e-invoicing mandate is now firmly in place, making preparation a critical priority. Businesses operating in the UAE are strongly advised to:
• Assess Systems: Conduct a readiness assessment of current Enterprise Resource Planning (ERP) and invoicing systems.
• Appoint an ASP: Identify and engage a Ministry-accredited Accredited Service Provider to handle the technical implementation and compliance.
• Review Master Data: Ensure all customer and vendor master data (including VAT Registration Numbers and addresses) is complete and accurate, as the simplified invoicing relief is no longer available.
• Integrate: Work with the ASP to map ERP data fields to the required UAE e-invoicing data dictionary and integrate the necessary APIs for real-time transmission and reporting.

The United Arab Emirates has embarked on a fundamental shift in its fiscal policy with the introduction of a federal Corporate Tax (CT) regime. Effective for financial years commencing on or after June 1, 2023, this landmark move aligns the UAE with global standards for tax transparency and fairness, and marks a significant step in diversifying government revenue beyond oil. 
The Corporate Tax is levied on the net income or profits of corporations and other entities derived from their business activities. 
Key Features and Rates
The UAE’s Corporate Tax regime is characterized by a globally competitive, tiered rate structure designed to support small and medium enterprises (SMEs). 

1. The Rate Structure
   The statutory tax rates are applied to a business’s Taxable Income (net profit):
   Taxable Income Threshold Corporate Tax Rate Notes
   Up to AED 375,000 0% Supports start-ups and small businesses.
   Exceeding 9% The standard
   Large Multinational Enterprises (MNEs) 15% Applicable to MNEs meeting specific criteria related to the OECD’s Pillar Two initiative (Global Minimum Tax).
2. Implementation Timeline:
   The FCT applies to the financial year that starts on or after June 1, 2023. 
3. Taxable Persons
   The FCT generally applies to two main categories of taxable persons:

• Resident Juridical Persons: Companies and other legal entities established or incorporated in the UAE (including Free Zones). 
• Non-Resident Juridical Persons: Foreign companies that have a Permanent Establishment (PE) in the UAE or derive income from real estate located in the UAE. 
• Natural Persons (Individuals): Individuals are subject to FCT only if they conduct a business or business activity in the UAE and their total annual turnover from such activities exceeds AED 1 million. 
  Key Exemptions and Reliefs
  The new law includes several provisions to maintain the UAE’s competitive edge and encourage specific types of investment. 

1. Free Zone Persons (Qualifying)
   Free Zone entities can benefit from a 0% Corporate Tax rate on Qualifying Income if they meet certain criteria, including:

• Maintaining adequate substance in the UAE. 
• Deriving “Qualifying Income” (as defined by the Cabinet). 
• Not having elected to be subject to the standard 9% rate. 
  Income derived from transactions with UAE mainland entities or real estate may be subject to the standard 9% rate.

1. Exempt Entities and Income
   A number of entities and types of income are specifically exempted:
   Exempt Entity Category Exempt Income Category
   Government Entities and Government-Controlled Entities. Dividends and Capital Gains from qualifying shareholdings.
   Extractive and Non-Extractive Natural Resource Businesses (if subject to Emirate-level tax). Personal Income (salaries, wages, employment income, personal investments).
   Qualifying Public Benefit Entities (charities, non-profits). Income derived from real estate investment by individuals in their personal capacity.
   Qualifying Investment Funds and Regulated Public/Private Pension Funds. Qualifying Intra-Group transactions and reorganizations.
2. Small Business Relief
   Small businesses that meet certain revenue thresholds (less than AED million in a relevant tax period) may elect to be treated as having zero taxable income and a 0% FCT rate. This is designed to reduce the compliance burden for the smallest businesses. 
   Compliance and Administration
   The Federal Tax Authority (FTA) is responsible for the administration, collection, and enforcement of the Corporate Tax. 

• Registration: All taxable persons, including Qualifying Free Zone Persons, must register with the FTA and obtain a Corporate Tax Registration Number. 
• Tax Return Filing: A single Corporate Tax return must be filed annually within nine months from the end of the relevant tax period. 
• Payment: The deadline for payment of any FCT liability is generally the same as the tax return filing deadline (nine months from the end of the tax period). 
• Transfer Pricing: The law introduces Transfer Pricing rules that require transactions between Related Parties to adhere to the “arm’s length principle.” 
• Basis of Taxation: The tax is calculated on the accounting net profit, based on financial statements prepared in accordance with International Financial Reporting Standards (IFRS), with specific adjustments mandated by the FCT Law. 
  The introduction of the Corporate Tax solidifies the UAE’s standing as a major global business hub, demonstrating its commitment to international fiscal governance while maintaining a highly competitive and investor-friendly environment.

The United Arab Emirates (UAE), including Dubai, has historically been known for its minimal tax environment. However, the introduction of a federal Corporate Tax Law (Federal Decree-Law No. 47 of 2022) (FCT), effective for financial years starting on or after June 1, 2023, marks a significant shift, bringing new compliance requirements and implications for the real estate sector. 
The FCT aims to align the UAE with international tax transparency standards and applies a standard rate of 9% on taxable income exceeding AED 375,000. Income up to this threshold is taxed at a 0% rate. 
Impact of Corporate Tax on Real Estate in Dubai
The FCT does not apply to the value of the property but rather to the income derived from real estate activities, and the impact varies significantly depending on the nature of the owner and the activity: 

1. Corporate Entities and Businesses

• Taxable Activities: Income derived from the ownership, use, or disposal of real estate by corporate entities—including rental income, capital gains from sales, and profits from real estate development, construction, agency, and brokerage—is generally subject to the 9% FCT rate if the net profit exceeds the AED 375,000 threshold. 
• Net Basis Calculation: The tax is calculated on a net basis, allowing for deductions of expenses incurred in generating the income, such as maintenance costs, interest, and depreciation. 
• Depreciation: The UAE government has introduced a key provision allowing taxable entities to claim a 4% annual tax depreciation on the original cost of investment properties held at fair value, which can help reduce taxable income. 
• Commercial vs. Residential: Income from both commercial properties and residential properties held for business/investment purposes by a corporation is typically subject to FCT. 
• Free Zone Entities: Real estate companies in Free Zones that qualify as Free Zone Persons may benefit from a 0% FCT rate on qualifying income. However, holding or managing property on the mainland, or transacting with mainland clients, may lead to partial or full exposure to the 9% tax. 

1. Individual Investors (Natural Persons)

• Personal Investment Exemption: A crucial distinction is made for individuals. Real estate investment income earned by individuals in their personal capacity is generally exempt from Corporate Tax, provided it is not part of a licensed business activity and the individual does not exceed a set annual turnover threshold (currently AED 1 million) from other business activities. 
• Non-Taxable Income Streams for Individuals (in a personal capacity):
• Income from the sale, leasing, or renting of property that does not require a commercial license. 
• Personal investment income (e.g., dividends, capital gains from shares). 
• Wages and salaries. 
• Taxable Income for Individuals: An individual who undertakes real estate activities that are considered a “business or business activity” (e.g., activities requiring a license, such as real estate management or high-volume short-term leasing) and whose turnover from all business activities exceeds the AED 1 million threshold may be subject to FCT on the profits exceeding AED 375,000. 
  Understanding UAE Real Estate Tax Regulations (Non-Corporate Tax)
  Beyond the Corporate Tax, investors in Dubai’s real estate market must navigate other established regulations:

Tax/Fee Rate Applicability Key Details
Annual Property Tax 0% None Dubai does not impose an annual recurring property tax on owned real estate.
Dubai Land Department (DLD) Transfer Fee 4% On the purchase price Payable to the DLD upon property transfer, typically split between buyer and seller, though often borne entirely by the buyer.
Value Added Tax (VAT) 5% Commercial property sales and leases. Applied to the sale and leasing of commercial properties (offices, shops, warehouses).
VAT Exemption/Zero-Rated 0% / Exempt Residential property The sale of new residential property within the first three years of completion is Zero-Rated (allows for VAT recovery). Subsequent sales and all residential leases are Exempt from VAT.
Municipality Housing Fee 5% Annual Rental Value A fee paid by the tenant (or owner-occupier) on the annual rental value, often collected via the utility bill.
Capital Gains Tax 0% Individuals There is generally no personal capital gains tax on the sale of property by an individual. Corporate entities are subject to the 9% CT on capital gains.

In conclusion, the UAE’s Corporate Tax primarily impacts corporate entities and individuals who operate real estate as a formal, licensed business activity. For the typical individual investor holding property in their personal name, Dubai remains a low-tax environment, free from annual property taxes and personal income tax on rental or capital gains. However, professional advice is essential to correctly structure real estate holdings and ensure compliance with the new Corporate Tax law.

Global Tax Guide to Doing Business in the UAE
The United Arab Emirates (UAE) has transitioned from a largely tax-free environment to a jurisdiction aligned with global standards, most notably through the introduction of a federal Corporate Tax (CT) regime. This shift is crucial for multinational entities operating or planning to establish a presence in the Federation.

Legal System
The UAE operates a Civil Law system, which means its legal framework is based on codified laws and statutes rather than judicial precedent. It is influenced by Islamic Sharia principles, particularly in personal matters and certain aspects of commercial law. The UAE has both a Federal court system and autonomous judicial systems in certain financial free zones, such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). These financial Free Zones utilize a distinct Common Law system, complete with English-language courts and independent regulatory bodies, offering an alternative legal framework for international finance and dispute resolution.
Taxation Authorities
Taxation is governed at the federal level. The two main authorities are:

Read more: Global Tax Guide to Doing Business in the UAE

1. The Federal Tax Authority (FTA): This is the principal body responsible for the administration, collection, and enforcement of all federal taxes, including Corporate Tax (CT), Value Added Tax (VAT), and Excise Tax. Businesses register with the FTA and file tax returns through its portal.
2. The Ministry of Finance (MoF): The MoF is responsible for drafting tax legislation, issuing Cabinet Decisions, and representing the UAE in international forums, including negotiating and implementing Double Taxation Treaties (DTTs).
   Business Vehicles
   Foreign companies typically structure their operations in the UAE using three primary entities:

• Mainland Limited Liability Company (LLC): This is the most common entity for trading activities within the UAE market. Recent legislative reforms have largely eliminated the mandatory requirement for a local partner in many sectors, allowing for up to 100% foreign ownership of an LLC.
• Free Zone Entity: The UAE hosts numerous Free Zones (special economic areas) that offer specific benefits, primarily 100% foreign ownership and the ability to repatriate all capital and profits. These entities are within the scope of Corporate Tax but may benefit from a 0% rate on qualifying income.
• Branch or Representative Office: These are considered an extension of the foreign parent company and are taxed as a Permanent Establishment (PE) in the UAE on locally sourced income.
  Financing a Corporate Subsidiary
  Financing a UAE-based subsidiary, typically through inter-company loans, is subject to strict compliance under the new Corporate Tax law, specifically concerning Transfer Pricing (TP) rules. The law adheres to the Arm’s Length Principle, requiring that the terms (including the interest rate) of related-party debt be consistent with what independent parties would agree to.
  Furthermore, the deduction of net interest expense is limited to 30% of the company’s Adjusted Taxable Income (an EBITDA-equivalent measure). This restriction aims to prevent excessive debt-loading within the UAE entity to shift profits out of the country.
  Corporate Tax (CT)
  The UAE introduced a federal CT regime (Federal Decree-Law No. 47 of 2022) effective for financial years commencing on or after June 1, 2023.
  The CT regime features a competitive dual-rate structure designed to support small and medium-sized enterprises (SMEs) while meeting international obligations:

1. 0% Rate: Applied to taxable income (profit) up to AED 375,000 (approximately US$102,000).
2. 9% Rate: Applied to taxable income exceeding AED 375,000.
3. Large Multinational Enterprises (MNEs): A different, currently unspecified, rate (expected to be 15%) will apply to large MNEs that meet the criteria for the OECD Pillar Two global minimum tax.
   Free Zone Taxation: Entities that qualify as a Qualifying Free Zone Person (QFZP) benefit from a 0% CT rate on their Qualifying Income. This zero-rate typically covers income derived from transactions with foreign parties or with other Free Zone entities, provided the QFZP maintains adequate substance.
   Cross-Border Payments
   The UAE maintains a favorable tax environment for cross-border transactions:

• Withholding Tax (WHT): The UAE currently imposes no domestic WHT on most payments made to non-residents, including dividends, interest, royalties, and service fees. This provides a significant advantage for multinational groups structuring their cash flows through the UAE.
• Transfer Pricing: While WHT is zero, the inter-company payments for services, royalties, or interest must still comply with Transfer Pricing documentation rules to ensure the payment amount is commercially justifiable at arm’s length.
  Payroll Taxes
  The UAE tax system is exceptionally simple for individual employees:
• Personal Income Tax: The UAE does not levy any personal income tax on wages, salaries, or other emoluments earned by employees.
• Social Security: While expatriate employees do not contribute to a mandatory payroll tax, employers are legally required to make mandatory contributions to a social security scheme for their UAE and GCC national employees only.
  Indirect Taxes
  Indirect taxes in the UAE primarily consist of VAT and Excise Tax, generating a substantial portion of the federal budget.
• Value Added Tax (VAT): Implemented in 2018, VAT is levied on most goods and services. The standard rate is 5%.
• Specific sectors and supplies, such as international transport, certain education and healthcare services, and exports, are subject to a 0% rate.
• Certain services, like specific financial services and residential property rentals, are exempt from VAT.
• Excise Tax: This tax applies to specific goods deemed harmful to human health or the environment. The rates are 50% for carbonated and sweetened drinks, and 100% for tobacco and tobacco products, electronic smoking devices, and energy drinks.