We are delighted to present the latest edition of our A&M Tax & Customs Newsletter, covering key developments from Q4 2025 and Q1 2026. This edition offers timely insights and analysis of the most significant tax and customs regulatory developments across the United Arab Emirates (UAE) over the past two quarters.

DIRECT TAX UPDATES

The UAE Federal Tax Authority Releases Public Clarification CTP008 – Corporate Tax Treatment of Family Wealth Management Structures

The UAE Federal Tax Authority (FTA) has issued Public Clarification CTP008, providing guidance on how UAE Corporate Tax (CT) applies to family wealth management structures, including Family Foundations, holding companies, Special Purpose Vehicles (SPVs), family offices, and family members.

Key Highlights:

• A Family Foundation or any family wealth management vehicle that does not have a separate legal personality is automatically treated as tax transparent. Those with a separate legal personality may apply to be treated as tax-transparent, subject to meeting specific conditions.
• Holding companies or SPVs wholly owned by a tax transparent Family Foundation may also apply to the FTA to be treated as tax transparent, provided the required conditions are met.
• Family offices that do not qualify for tax transparency are treated as taxable persons and are subject to UAE CT on all their income, including management fees and any other income earned. Such family offices must be remunerated on an arm’s-length basis for services provided to Related Parties or Connected Persons.
• Family offices established in a Free Zone may benefit from a 0% CT rate on qualifying income if they meet the conditions to be treated as a Qualifying Free Zone Person (QFZP).
• Family members in a Family Foundation are not subject to CT on Personal Investment Income or Real Estate Investment income, provided the income is earned from a family wealth management vehicle that is a taxable person or from a tax transparent trust, foundation, or similar entity that meets the relevant conditions.

For further details on Public Clarification CTP008, please click here.

Corporate Tax Exemption for Sports Entities

In January 2026, the UAE Ministry of Finance (MoF) issued Cabinet Decision No. 1 of 2026, granting a CT exemption to certain sport entities that support the development, promotion, and governance of sports at the international and regional levels. The measure applies retrospectively from June 1, 2023, aligning with the effective start date of the UAE CT regime.

Key Highlights:

• The exemption applies to International Sports Entities, as well as Sports Entities, and Ancillary Entities (both of which must be wholly owned and controlled by an International Sports Entity).
• Entities must only conduct activities that directly relate to their principal or sole business objectives, ensure all its income, expenses, and assets are used exclusively to support those objectives, and ensure that no part of their income or assets is paid to, or otherwise, made available for, the private or personal benefit of any shareholder, member, trustee, founder, or settlor (subject to limited exceptions).

For further details on this Decision, please click here.

Advanced Corporate Tax Payments on the EmaraTax Portal

The FTA has introduced an advanced CT payment option on the EmaraTax Portal. While no Cabinet Decision or Ministerial Decision has yet been issued formally introducing this mechanism, taxpayers are currently able to make advanced CT payments through the portal.

Based on the current functionality available on the EmaraTax Portal, advance payments may be applied to the following:

• Payment toward the next CT return filing.
• Payment toward future outstanding tax liabilities.
• Payment toward a Penalties Installment Plan.

Timely Insights into the Newly Released Legislation on R&D Tax Credits

The UAE has now published the long‑awaited framework legislation for an R&D tax credit under the UAE CT regime through Cabinet Decision No. 215 of 2025, supplemented by Ministerial Decision No. 24 of 2026. The framework establishes the structure of an R&D “tax credit balance” that can be used to settle UAE CT and, importantly, can also be applied against UAE Top‑Up Tax levied under the DMTT, where relevant.

Key Highlights:

• The regime applies to entities subject to UAE CT and/or Top-Up Tax, including foreign groups with UAE permanent establishments, provided they undertake qualifying R&D activities within the UAE.
• “Qualifying R&D activity” is explicitly tied to conditions provided in Article 3 of Ministerial Decision No. 24 of 2026 (e.g., novel, creative uncertain in outcome or means to achieve the objective, transferable or reproducible) and is also linked to an R&D project that is systematic in its approach.
• The Decision sets the main eligible cost categories, including personnel costs, consumables, subcontracting fees, and cost contribution arrangements. Additionally, Ministerial Decision No. 24 of 2026 specifies that the R&D tax credit is non-refundable (although it can be transferred between group companies) and that the following rates apply:

• Eligible R&D expenditure must be wholly and exclusively incurred for the purposes of qualifying R&D, be deductible or capitalized as in-house-developed intangible assets under IFRS, and not be grant-funded. A minimum threshold of AED 500,000 per R&D project per Tax Period applies to making a claim.
• To access the credit, businesses must meet conditions, including a minimum R&D employee participation threshold, obtain prior approval from the R&D Council through a pre-approval process, which is pending further details, bear the financial risk of the R&D activities, retain a share of the resulting benefits, and ensure the project genuinely aims to advance knowledge or innovation.
• Claims must be submitted through the CT or DMTT return for the relevant period and must be supported by the required documentation.

Cabinet Decision No. 215 of 2025 confirmed that the credit is non-refundable but can be used to reduce tax liabilities in a current or future Tax Period, for the Qualifying Entity and certain group members.

For further details on the newly released R&D tax credit legislation, please click here.

TRANSFER PRICING UPDATES

The FTA’s Comprehensive Advance Pricing Agreement Guidance

On December 30, 2025, the UAE FTA released the Advance Pricing Agreement (APA) CT Guide (CTGAPA1). The guide sets out the procedural framework for taxpayers seeking tax certainty through APAs in the UAE.

Key Highlights:

• Taxpayers can now apply for domestic APAs, with applications accepted from December 2025. Cross-border APA processes are expected to be introduced later in 2026.
• APAs cover a minimum of three and a maximum of five tax periods and currently apply prospectively only, with no roll-back to prior years.
• To qualify, the total expected value of related party transactions must be at least AED 100 million per tax period. Certain transactions, such as low value-adding intra-group services, are excluded from both the APA scope and the threshold calculation.
• The APA lifecycle comprises a pre-filing consultation, formal application (subject to a non-refundable fee), evaluation and negotiation of the TP methodology, and final conclusion.
• New applications are subject to a fee of AED 30,000, while renewal applications are subject to a fee of AED 15,000.
• Once an APA is signed, taxpayers must file an APA Annual Declaration for each covered Tax Period. It must be submitted within 90 business days of the signed APA or by the CT return due date, whichever is later.

For further information on the APA CT Guide, please click here.

INDIRECT TAX UPDATES – Value Added Tax (VAT), Customs and Excise Tax

The UAE MoF Publishes Cabinet Decision No. 129 of 2025

On October 9, 2025, the UAE MoF issued Cabinet Decision No. 129 of 2025, which becomes effective on April 14, 2026. The decision introduces significant amendments to the administrative penalty framework, aligning VAT and Excise Tax with those applicable under the UAE CT Law, as previously outlined in Cabinet Decision No. 75 of 2023.

Key changes compared to Cabinet Decision No. 108 of 2021 (effective until April 13, 2026) include:

• Failure To Keep Required Records: Tighter repetition rules – AED 10,000 per violation and AED 20,000 if repeated within 24 months.
• Failure To Submit Tax Data/Records in Arabic: Penalty reduced from AED 20,000 to AED 5,000.
• Failure To Inform the FTA of Changes To Tax Records: Penalty reduced from AED 5,000 to AED 1,000 for a first-time offense and a fine for repeating a violation would be applicable if the offence is made within a 24-month period.
• Legal Representative Failed To Notify Appointment: Penalty reduced from AED 10,000 to AED 1,000.
• Late Payment of Payable Tax: Penalty reduced from 2% (first month) + 4% monthly thereafter to an effectively 1.17% per month.
• Incorrect Tax Return: Penalty reduced, and the provision has been simplified. Further, no Voluntary Disclosure (VD) penalty applies where there is no change in the amount of tax due.
• VD Submitted: In most cases, these penalties have increased.
• Failure To Submit a VD Before an Audit Notice: Penalty reduced from a fixed 50% plus 4% monthly to fixed 15% plus 1% monthly.
• Failure To Calculate Tax on Behalf of Another Person: Late payment penalty reduced from 2% for the first month plus 4% monthly thereafter to an effective 1.17% per month.

For further information on Cabinet Decision No. 129 of 2025, please click here.

Significant Amendments to the UAE VAT Law and Tax Procedures Law

On November 25, 2025, the UAE MoF issued two major legislative updates, both taking effect on January 1, 2026:

• Federal Decree-Law No. 16 of 2025 – Amends key provisions of the UAE VAT Law.
• Federal Decree-Law No. 17 of 2025 – Introduces extensive amendments to the Tax Procedures Law.

Key VAT Law Amendments:

• Clarifies that taxpayers are not required to issue self-invoices for imports of goods and for services used for business purposes.
• Excess input tax may be carried forward for up to five years from the end of the tax period in which it arose, after which the credit cannot be used, offset, or refunded.
• New anti‑tax evasion rules allow the FTA to deny input tax deductions when a supply is linked to tax evasion and the taxpayer knew or should have known of the connection.

Key Tax Procedures Law Amendments:

• The FTA must apply excess input tax credits and overpayments to any tax or penalty obligation within five years.
• Only specific errors identified by the FTA will require a VD; other errors may be corrected directly in the tax return.
• While the standard audit period remains five years, exceptions allow audits beyond this time frame when taxpayers submit refund claims in the fifth year of the Statute of Limitations period.
• Taxpayers whose five-year claim period has expired or will expire within one year of the Decree-Law’s effective date may still request a refund or apply credit balances toward tax due or penalties, as long as the request is submitted within one year from January 1, 2026.

For further details on these amendments, please click here.

Excise Tax Updates December 2025

In December 2025, the UAE issued a series of Excise Tax legislative amendments and clarifications that introduce material changes to both the tax methodology for sweetened drinks and the administrative framework governing Excise Tax compliance. The key developments are effective from January 1, 2026.

Key Highlights:

• When a product registration is submitted without a valid accredited laboratory certificate confirming sugar content, the FTA will, by default, treat the product as high sugar.
• A transitional relief mechanism allows businesses to recover Excise Tax, only as a deduction in their tax return (not as a refund), and only on unsold stock, once a valid laboratory certificate is obtained.
• Confirmation on how sugar content should be determined for concentrates, powders, gels, and extracts when preparation instructions are unavailable or unclear.
• A public clarification confirms that a single laboratory certificate may be used for multiple products with identical formulations, while different flavors or formulations require separate certification.
• When Excise Tax was previously paid on Sweetened Drinks and the liability under the new tiered-volumetric model is lower, the difference may be deductible for unsold stock, subject to supporting evidence.
• The amendments update registration rules to allow liability-based and potentially backdated Excise Tax registration with penalties, align deduction and refund procedures with the Tax Procedures Law including clearer documentation requirements, and require Warehouse Keepers in designated zones to retain deficient Excise Goods pending FTA inspection and approval for destruction.

For further details on these updates, please click here.

Profit Margin Scheme Guide

The UAE FTA released its guide on the Profit Margin Scheme (PMS) in January 2026. PMS is a VAT mechanism designed to prevent double taxation by applying VAT only to the profit margin (i.e., the difference between the selling price and purchase price) when input tax on the original acquisition was not recoverable.

Key Highlights:

• PMS traditionally applied to secondhand goods, antiques more than 50 years old, and collectors’ items. The new guidance clarifies that goods with blocked input tax under Article 53 of the VAT Executive Regulations (ER) may also qualify, even if not explicitly listed as eligible.
• PMS can be used when goods are purchased from non‑registrants, from suppliers already applying PMS, or when input tax was blocked under Article 53 of the ER. Documentary proof that VAT was previously applied must be maintained.
• PMS cannot be applied when the supplier issues a VAT invoice showing the VAT amount, when import VAT is recoverable, when goods were acquired before the introduction of VAT (pre‑2018), or when goods have been transformed into something substantially new.
• Invoices must clearly state that VAT is charged based on the profit margin.

For further details on the PMS Guide, please click here.

E-INVOICING UPDATES

UAE e-Invoicing Guidelines – February 2026 Regulatory Clarifications and Technical Implementation Framework

The MoF has issued the UAE e-Invoicing Guidelines and accompanying technical specifications, providing critical regulatory and implementation details for the nationwide rollout of e‑invoicing under Ministerial Decisions No. 243, 244, and 64 of 2025.

Key Highlights:

• The e-Invoicing regime applies to any person conducting business in the UAE, regardless of VAT registration status, and it covers all business transactions.
• Transactions involving supplies to natural persons are out of scope. Certain sovereign government activities, specific airline passenger‑related services, and some exempt financial services are also excluded.
• The participant identifier is derived from the Tax Identification Number (TIN) (first ten digits of the Tax Registration Number), and any person conducting in-scope transactions in the UAE must register with the FTA to obtain a TIN, even if not currently registered for tax.
• E‑invoicing obligations include intra‑group transactions, but businesses have a 24‑month grace period from January 1, 2027, during which compliance and penalty enforcement will not apply.
• Physical servers outside the UAE are permissible, provided records are retrievable and reproducible by the FTA. Retention requirements align with Cabinet Decision  74 of 2023, generally five years, with extensions for real estate and audit-related cases.

For further details on the UAE e-Invoicing Guidelines, please click here.

ALERTS/BROCHURES

In addition to the updates mentioned above, we have published the following alerts/brochures:

Fuel for Innovation: UAE Introduces Groundbreaking R&D Tax Credits

The UAE MoF has announced the introduction of R&D Tax Credits that will begin from January 1, 2026. Although the legislation has not yet been released, our UAE R&D team has prepared a brochure outlining key anticipated features of the regime, including:

• An indicative tax credit range of 30% to 50%, as suggested by the MoF.
• Sectors expected to qualify for the R&D tax credit.
• Qualifying R&D costs based on international schemes.
• Next steps for businesses that may benefit from R&D Tax Credits.

For further information and to access the brochure, please click here.

From VAT To Corporate Tax: How the FTA’s Risk-Based Audits Will Shape Compliance in 2026

As the UAE moves beyond its first CT filing cycle, the FTA is expected to adopt a risk-based, data-driven audit approach, building on the audit frameworks already established under VAT.

Key points highlighted in the alert include:

• CT audits will be risk-driven rather than random, with a focus on data analytics and reconciliation across tax types.
• VAT and CT audits fall under the same Tax Procedures Law, meaning taxpayers should expect similar audit processes, timelines, and documentation requests.
• Mismatches among VAT, CT, and TP positions may trigger audit attention.
• The upcoming e-Invoicing regime will further enhance the FTA’s ability to identify discrepancies in real time.
• Cabinet Decision No. 129 of 2025 has been issued to simplify the penalty structure and ensure consistency across all tax types.

For further information and to read the full Tax Alert, please click here.

Key UAE Real Estate Tax Investment Considerations

The UAE’s real estate market, projected to reach nearly USD 700 billion by the end‑2025, continues to be a magnet for local and international investors. However, navigating the tax landscape is critical to maximizing returns and avoiding unexpected liabilities.

The article covers the following key points:

• A natural person purchasing property for residential or investment purposes is not subject to UAE CT, whereas a juridical person is subject to UAE CT at 9%, unless it qualifies as a QFZP.
• The UAE CT law allows the deductibility of interest expenditure, provided these do not breach the General Interest Deductibility Rule or the Special Interest Deduction Limitation rule.
• Related party transactions must be priced and documented on an arm’s length basis.
• The VAT treatment of real estate acquisitions depend on the type of property (commercial vs. residential), regardless of whether the buyer is an individual or a corporate entity.

For further information and to read the full article, please click here.

From Tax Benefits To Growth Potential: Why the UAE Is the Ideal Hub for Asset Managers

The UAE continues to establish itself as a leading global destination for asset managers, driven by a combination of tax efficiency, regulatory strength, and access to capital.

The article covers the following key points:

• A range of investment fund structures is available in the UAE, catering to different asset classes, investor types, and regulatory frameworks.
• Investment funds may benefit from favorable tax regimes, including Qualifying Investment Fund status (which can provide CT exemption) and QFZP status (subject to a 0% CT rate on Qualifying Income).
• Most investment funds fall outside the scope of taxable persons for VAT purposes unless they directly supply taxable services.
• Fund management services provided to UAE-licensed funds are VAT-exempt.
• Related party transactions must comply with the arm’s length principle, with common examples including assets under management fees, capital raising, financing, C-suite services, and back-office support services.
• The article also highlights the international tax implications of carried interest, including how it may be treated across jurisdictions and the importance of structuring.

For further information and to read the full article, please click here.

Why the Introduction of e-Invoicing Matters for Mergers and Acquisitions in the UAE?

The introduction of e-Invoicing in the UAE goes beyond tax compliance, representing a fundamental shift in how financial data is generated, validated, and used in transactions, with significant implications for mergers and acquisitions.

Key Highlights:

• e-Invoicing introduces structured, time-stamped, and system-driven data, significantly improving the quality and reliability of financial information used by investors and buyers.
• It enhances the quality of earnings by reducing manual adjustments, improving audit outcomes, and shifting the focus from reconciliations to system integrity and controls.
• Due diligence processes are evolving, becoming more data-driven and efficient, with issues identified earlier and transaction timelines accelerated for well-prepared businesses.
• Increased transparency makes certain positions harder to defend, including revenue cut-off judgments, manual adjustments, and inconsistent VAT treatments, shifting deal discussions from narrative to data.
• e-Invoicing enables more precise pricing and risk allocation, leading to more targeted adjustments, reduced reliance on broad escrows, and fewer post-deal surprises.

For further information and the full article, please click here.

For any questions about implementing these key tax updates in your tax journey, please reach out to a member of the A&M Tax team