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UAE VAT Amendments as Per Cabinet Decision No. 149 of 2026

UAE VAT Return Gets a New Best Friend: How E-Invoicing is Changing Tax Compliance

UAE VAT: New Supplier and Supply Verification Requirements

UAE VAT Amendments as Per Cabinet Decision No. 149 of 2026

Technovisors — Fri, 09 Oct 2026 06:01:04 +0000

October 9, 2026

Cabinet Decision No. 52 of 2017 on the Executive Regulation of Federal Decree-Law No. 8 on VAT(Amendments to the UAE VAT)

The UAE Cabinet issued Cabinet Decision No. 149 of 2026 on 1 September 2026. For each change, we set out (1) the old provision, (2) the new provision, (3) its relevance and impact and (4) a practical example.

1. Article 4(6): Bundled supplies and the new economic substance test

Article 4 deals with a supply that has more than one component. The supplier has to decide whether it is a single composite supply. Composite supply comes into picture when there are multiple supplies with different VAT treatment.

Old Provision

New Provision

–

Clause (6) is added:

A Taxable Person may not consider a supply consisting of more than one component as multiple supplies if the nature of the supply and its economic substance demonstrate that these components are interconnected and cannot be separated. In such case, the supply shall be deemed a single composite supply, and shall be subject to the tax treatment in accordance with its principal component.

Until now, if the supplier showed a separate price for each part on the invoice, the parts were generally treated as separate supplies. New Clause 6 brings in a test based on substance. If the nature of the supply and its economic reality show that the parts are interconnected and cannot be separated, the business cannot treat them as separate supplies. The whole supply then takes the VAT treatment of its principal component.

Example 1: parts that cannot be separated. ABC Medical Equipment LLC sells a diagnostic scanner to a hospital. Assume the scanner is a zero-rated medical product. Under the manufacturer’s warranty, only ABC can install and calibrate the scanner, and the scanner cannot be used until this is done. The invoice shows:

Particulars	AED
Diagnostic scanner	2,400,000
Installation and calibration	150,000
Total	2,550,000

Under the old rules, ABC might have treated the installation as a separate standard-rated service and charged VAT of AED 7,500, simply because it was priced separately. Under Clause 6 there is a reasonable case that the scanner and its installation are interconnected and cannot be separated: the hospital cannot use one without the other and cannot get the installation from anyone else. If that is right, the full AED 2,550,000 follows the principal component and is zero-rated.

Example 2: parts that can be separated. A developer sells a new villa (a first supply of a residential building within three years of completion, so zero-rated) and offers an optional furniture package for AED 120,000. Buyers can take the villa without the package. The furniture can clearly be separated from the villa, so Clause 6 does not apply. The furniture remains a separate standard-rated supply, with VAT of AED 6,000.

Old Provision

New Provision

–

Clause (6) is added:

2. Article 29 (5) : Profit margin scheme - purchase price revised

The profit margin scheme lets a business that sells second-hand goods or antique items pay VAT only on its margin (margin = selling price less purchase price) instead of on the full selling price. The margin is treated as VAT inclusive, so the VAT = Margin × 5/105.

Old Provision	New Provision
The “purchase price” stated in Clause 4 of this Article includes, in addition to the price of the Good, any costs and fees incurred to purchase the Good.	The “purchase price” stated in Clause 4 of this Article includes, in addition to the purchase price of the Good, any costs or fees incurred to purchase the Good, provided that the Input Tax on such costs or fees, where incurred, is not recoverable pursuant to the provisions of Article 54 of the Decree-Law.

Before the amendment, a dealer could add any cost of buying the goods to the purchase price, for example a broker’s commission. The law said nothing about the VAT on that additional cost.

This gave the dealer a double benefit on the same cost: 1. The dealer claimed back the VAT paid on the commission. 2. The dealer also added the commission to the purchase price.

A higher purchase price means a smaller margin. A smaller margin means less VAT to pay to FTA.

The new rule stops this. A cost can now be added to the purchase price only if the dealer cannot claim back the VAT on it.

Practical Example:

XYZ Used Cars LLC buys a car from an individual for AED 60,000. It also pays for a pre-purchase inspection and the ownership transfer fee. It later sells the car for AED 70,000 under the margin scheme.

	Old Rule	New Rule
Price paid to Individual	60,000	60,000
Commission and inspection incurred (VAT 130 recovered)	2,600	–
Purchase price	62,600	60,000
Selling price	70,000	70,000
Margin	7,400	10,000
VAT Payable (Margin * 5/105)	352.38	476.19

XYZ LLC now pays more VAT by 123.81 (476.19 – 352.38). That is exactly the VAT amount which was already recovered on AED 2600 for commission and inspection. (2600*5/105 = 123.81)

3. Article 41(4): Zero-rated healthcare goods become medical products

Article 41 covers zero-rating in the healthcare sector. Clause 4 lists the goods (and imports) that can be zero-rated.

Old Provision

New Provision

4. A supply of Goods or an Import of Concerned Goods is zero-rated if it is a supply or an Import of:

a. Any pharmaceutical products as specified in a decision issued by the Cabinet.

b. Any medical equipment as specified in a decision issued by the Cabinet.

c. Any other Goods not covered by paragraphs (a) and (b) of this Clause which are supplied in the course of supplying a Person with zero-rated Healthcare Services that are necessary for the supply of such Healthcare Services.

4. A supply of Goods or an Import of Concerned Goods is zero-rated if it is a supply or an Import of:

a. Any medical product as specified in a decision issued by the Cabinet.

b. Any other Goods not covered by paragraph (a) of this Clause which are supplied in the course of supplying a Person with zero-rated Healthcare Services that are necessary for the supply of such Healthcare Services.

Relevance of the changes in provision: The two separate categories, “pharmaceutical products” and “medical equipment”, are replaced by a single category “, medical product”. Reason for the change is that the Ministry of Finance has said it brings the VAT rules in line with the UAE’s updated healthcare legislation, which uses “medical products” as a broad term.

4. Article 52(2): “Outside the State” now means less than 30 days

Financial services such as interest-bearing loans are generally exempt and VAT on costs linked to exempt supplies is normally not recoverable.

Article 52(1) makes an exception: where exempt financial services are supplied to a recipient who is outside the State (and the place of supply is treated as outside the State), the related input tax can be recovered. Clause 2 explains when a person who is physically in the UAE can still be treated as “outside the State”.

Old Clause	Revised Clause
For the purpose of Clause 1 of this Article a Person is “outside the State” even if they are present in the State, provided it is only a short-term presence in the State of less than a month, and that his presence is not effectively connected with the supply.	For the purposes of Clause 1 of this Article, a Person shall be considered “outside the State” if only present in the State for a period of less than 30 (thirty) days, and such presence is not effectively connected with the supply.

“Less than a month” was unclear because months run from 28 to 31 days. The new limit is less than 30 days.

5. Article 53(1)(c) and FTA Decision No. 17 of 2026: Input tax on employee expenses

Article 53 lists input tax that cannot be recovered. Paragraph (c) of Clause 1 covers goods or services bought for employees, given free of charge to them and for their personal benefit, including entertainment expenses.

That input tax is blocked unless one of four exceptions applies. Decision 149 rewrites the first two exceptions. The third (health insurance) and the fourth (deemed supplies) are unchanged.

Old Provision

New Provision

c. Where Goods or Services were purchased to be used by employees for no charge to them and for their personal benefit including the provision of entertainment services, except in the following cases:

1) Where it is a legal obligation to provide those Services or Goods to those employees under any applicable labour law in the State or Designated Zone.

2) Where it is a contractual obligation or documented policy to provide those services or goods to those employees in order that they may perform their role and it can be proven to be normal business practice in the course of employing those people.

1) Where the provision of those Goods or Services to the employees is mandatory under the applicable labour legislation in the State or any free zone, including financial and non-financial free zones, provided that this does not include the accommodation provided by the employer to its employees, unless the provision of such accommodation is mandatory pursuant to the decisions or directives issued by the Ministry of Human Resources and Emiratisation.

2) Where it is a contractual obligation or documented policy to provide those Goods or Services to the employees, in accordance with the cases and conditions specified by the Authority.

Relevance and impact of the same is as follows:

Exception 1 (benefits required by labour law) has changed in three ways:

Wider geography. The old text referred to labour law in the State or a “Designated Zone”, which is a narrow VAT term for zones listed by Cabinet Decision.

The new text covers the State and any free zone and includes financial free zones such as Dubai International Financial Centre – DIFC and Abu Dhabi Global Market – ADGM, which have their own employment laws.

“Mandatory” is the test. The benefit must be mandatory under the applicable labour legislation, not merely allowed or in-practice.

Accommodation is carved out. Staff accommodation no longer qualifies under this exception just because a labour law requires it. It qualifies only if it is mandatory under decisions or directives issued by MOHRE.

Exception 2 (contract or documented policy) is the bigger change. Before, a business could recover VAT if it had a contract or written policy, the benefit helped the employee do the job, and it could show that the benefit was normal business practice. Many businesses relied on exactly this to recover VAT on housing, meals and other staff costs. That argument no longer works on its own.

A contract or policy now helps only if the expense falls into one of the cases listed by the FTA and meets every condition for that case. Those cases are set out in FTA Decision No. 17 of 2026, explained below.

FTA Decision number 17 of 2026 for cases and conditions for recovering input tax on employee expenses:

FTA Decision No. 17 of 2026 was issued on 9 September 2026 and applies from 1 October 2026. Article 1 of the decision says it applies when a taxable person buys goods or services for employees, free of charge to employees, under a contractual obligation or documented policy.

Article 2 allows recovery in only six cases. In each case, every listed condition must be met. The table below summarises them.

Cases	Conditions that must be satisfied
1. Employee Transportation expenses	(a) The transport is only between the employee’s home and the workplace or a client’s premises or for other purposes directly related to the job. (b) It is not used for the employee’s personal benefit. (c) The employee cannot choose a cash allowance or other compensation instead.
2. Food and Beverages to employees	(a) The employee lives in a remote, distant or isolated area. (b) There are no suitable facilities to prepare food at the employee’s residence or workplace and no nearby restaurants from where food can easily be obtained. (c) The provision of food is directly linked to the working period or the period of residence, that the job requires. (d) The employee cannot choose a cash allowance instead.
3. Accommodation / place of residence for employees	(a) The employee cannot choose a cash allowance or other compensation instead. (b) The accommodation is linked to the operational needs of the work and is not part of the employee’s benefits or normal pay package. (c) The nature of the work requires the employee to live near the workplace, work site or client location. (d) It is for the employee only, with no family members or other personal use, unless the employee is required to live permanently near the workplace so that it is his or her usual home. (e) It matches the job requirements and basic living needs, without significant recreational or personal extras.
4. Accommodation for new employees	(a) The accommodation is temporary and lasts no longer than 30 days. (b) It matches the job requirements and basic living needs.
5. Mobile phones, airtime, data packages from place of residence to employees	(a) They are necessary for the employee to do the job, including outside working hours or away from the workplace (for example, remote working). (b) Use is limited to work; any personal use is incidental and insignificant. (c) The employer has a documented internal policy that sets out permitted use and the consequences of misuse. (d) The employer has reasonable monitoring in place and keeps records and justifications for any unauthorised use.
6. Parking spaces allowed to employees	(a) The fees are incurred solely for business purposes, directly related to the employee’s duties or to business visits and assignments. (b) The employer has a documented internal policy on when parking is reimbursed and how it is approved. (c) Proof of payment is kept, such as receipts showing the date, time, amount and VAT paid.

Important points to note:

The cash allowance – Not allowed: For transport, food and accommodation, recovery of input tax is lost if the employee can choose cash compensation instead. Many employment contracts offer this choice. Where the choice exists, the VAT is not recoverable even for employees who take the benefit in kind.

Accommodation is narrowed: It can still be recovered under Case 3, but only where housing is an operational need (for example, staff who must live at or near a remote site or a client location), is not part of the pay package, is for the employee alone, and is of a basic standard. Executive housing offered as a perk will not qualify.

Where VAT actually arises on housing: Most ordinary residential leases are exempt, so there is no VAT to recover in the first place. The issue mainly concerns standard-rated accommodation such as hotel rooms, hotel apartments and serviced apartments and related standard-rated charges.

Paperwork/Policy required: Cases 5 and 6 need a written policy, an approval process, monitoring and receipts. Without them, recovery fails even where the cost is genuinely for work.

Anything outside the six cases: Benefits such as gym or club memberships, or everyday staff meals at a city office, cannot be recovered through the documented-policy route. They are recoverable only if they fall within Exception 1 (mandatory under labour law), Exception 3 (health insurance) or Exception 4 (deemed supply).
Genuine business costs are not affected. Article 53(1)(c) only applies to goods and services for the employee’s personal benefit. Costs that are really for the business, such as a hotel stay on a business trip or safety equipment, are generally outside this rule altogether.

6. Article 54 (3) : No input tax on large cash payments

Article 54 of the Executive Regulation deals with when input tax can be recovered in relation to payment of the supplier. Decision 149 adds a new Clause 3.

Clause (3) is added: Input Tax may not be recovered on any supply which has a value exceeding the amount specified in a decision issued by the Minister where the consideration is paid or intended to be paid in cash, in accordance with the controls specified in that decision.

Input tax will not be recoverable on a supply worth more than a set amount if the supplier is paid in cash.

“Or intended to be paid” matters: The test looks at how the business plans to pay, not only at how it has already paid. A business that plans to settle a large invoice in cash should not expect to recover the VAT on it.

The policy aim is clear. Large cash payments are hard to trace and are often linked to fake invoices and fraud. The clause sits alongside the FTA’s wider push, also from 1 October 2026 under FTA Decision No. 13 of 2026, for businesses to check their suppliers before claiming input tax.

7.Article 55(6) and (7): A new way to apportion input tax

Businesses that make both taxable and exempt supplies, such as landlords with commercial and residential property, banks and finance companies and some holding companies, cannot recover all of their input tax. They first attribute input tax directly: VAT on costs used only for taxable supplies is recovered in full and VAT on costs used only for exempt supplies is not. What is left is the residual input tax on shared overheads, which is split using a recovery percentage. Clauses 6 and 7 set out how.

Clause (6) : Attribution of input tax

Old Provision

New Provision

6. To determine the Input Tax that could be recoverable, the Taxable Person shall apportion Input Tax as follows:

a. Input Tax on supplies that wholly relate to supplies as specified in Clause 1 of Article 54 and Article 57 of the Decree-Law made by the Taxable Person may be recoverable in full.

b. Input Tax that is not recoverable in accordance with Article 53 of this Decision or that does not relate to supplies specified in Clause 1 of Article 54 and Article 57 of the Decree-Law made by the Taxable Person may not be recoverable unless the provisions of the Decree-Law and this Decision provide otherwise.

c. Input Tax that partly relates to supplies as specified in Clause 1 of Article 54 and Article 57 of the Decree-Law and partly not, shall be calculated in accordance with Clause 7 of this Article, and only the part that relates to supplies specified in Clause 1 of Article 54 and Article 57 of the Decree-Law may be recoverable.

6. To determine the Input Tax that could be recoverable, the Taxable Person shall apportion Input Tax as follows:

a. Input Tax that relates to supplies, as specified in Clause 1 of Article 54 and Article 57 of the Decree-Law, made by the Taxable Person, may be recovered in full.

b. Notwithstanding paragraph (a) of this Clause, Input Tax that is not recoverable in accordance with Article 53 of this Decision or that does not relate to supplies specified in Clause 1 of Article 54 and Article 57 of the Decree-Law, may not be recoverable unless the provisions of the Decree-Law and this Decision provide otherwise.

c. Input Tax that partly relates to supplies as specified in Clause 1 of Article 54 of the Decree-Law and partly relates to other supplies, shall be calculated in accordance with the mechanism set out in Clause 7 of this Article, and only the part that relates to supplies specified in Clause 1 of Article 54 of the Decree-Law may be recovered.

d. Notwithstanding paragraph (c) of this Clause, Input Tax that partly relates to the supplies specified in Clause 1 of Article 54 of the Decree-Law, and Article 57 of the Decree-Law, and partly relates to other supplies, in respect of Government Entities and Charities, shall be calculated in accordance with the mechanism set out in Clause 19 of this Article.

Clause (7) : The recovery percentage:

Old provision

New provision

7. The Input Tax that could be recoverable shall be calculated as follows:

a. The Taxable Person shall calculate the percentage of Recoverable Tax with reference to Clause 1 of Article 54 and Article 57 of the Decree-Law, to the sum of Input Tax for the Tax Period.

b. The percentage calculated under paragraph (a) of this Clause shall be rounded to the nearest whole number.

c. The percentage calculated under paragraph (b) of this Clause shall be multiplied by the amount of Input Tax referred to in paragraph (c) of Clause 6 of this Article to establish the recoverable portion of that Input Tax.

7. Input Tax that could be recoverable shall be calculated as follows:

a. The Taxable Person shall calculate the percentage of total supplies as specified in Clause 1 of Article 54 of the Decree-Law, to the total value of all supplies.

b. The supply of Capital Assets attributable to the Taxable Person, the receipt of the Concerned Goods and the receipt of the Concerned Services in accordance with Article 48 of the Decree-Law, shall be excluded from the calculation of the percentage referred to in paragraph (a) of this Clause.

c. The percentage calculated under paragraph (a) of this Clause shall be rounded to the nearest whole number.

d. The percentage calculated under paragraph (c) of this Clause shall be multiplied by the amount of Input Tax referred to in paragraph (c) of Clause 6 of this Article to establish the recoverable portion of that Input Tax.

Relevance and Impact:

Clause 6: Direct attribution works same as before. Two points are worth noting.

First, the words “Notwithstanding paragraph (a)” in paragraph (b) make it clear that input tax blocked under Article 53 (Entertainment, Personal Motor vehicle expenses and Employee benefits) stays blocked even if it relates to taxable supplies.

Second, for ordinary businesses, the reference to Article 57 of the Decree-Law (recovery by Government Entities and Charities) is dropped from the residual calculation, and the new paragraph (d) sends Government Entities and Charities to their own method in Clause 19 (see Section 8 in this article).

Clause 7 is where the real change is.

Current method (input-based). The percentage is worked out from the input tax itself. Broadly, it compares the input tax directly attributable to recovery-eligible supplies with the total input tax directly attributable to recovery-eligible and exempt supplies, leaving out blocked input tax. The result depends on what a business spends.

New method (supplies-based). The percentage is the value of supplies that give the right to recover input tax under Article 54(1) of the Decree-Law, divided by the total value of all supplies. Put simply: recovery-eligible turnover ÷ total turnover. The result depends on what a business earns.

Practical Example:

XYZ Real Estate LLC owns commercial units (standard-rated rent) and residential flats (exempt rent). Its figures for a tax year are:

	AED
Commercial rent (standard-rated)	8,000,000
Residential rent (exempt)	12,000,000
Input tax directly on commercial units	150,000
Input tax directly on residential units	50,000
Residual input tax (head office, audit, IT, legal)	120,000

	Current method	New method
How the percentage is worked out	150,000 ÷ (150,000 + 50,000)	8,000,000 ÷ 20,000,000
Recovery percentage	75%	40%
Residual input tax recovered	AED 90,000	AED 48,000

On the same facts, XYZ recovers AED 42,000 less each year under the new method.

When does new method start?

These changes did not start on 1 October 2026. They apply from the first tax year commencing after 1 October 2027. Until then, the current method continues.

8. Article 55(19) : A separate method for Government Entities and Charities

Under Article 57 of the Decree-Law, Government Entities and Charities designated by Cabinet Decision can recover input tax relating to their sovereign activities and relevant charitable activities, even though those activities often produce no taxable “supply” at all.

A turnover-based formula would not suit them, so the Decision gives them their own method.

Clause (19) is added: For the purposes of paragraph (d) of Clause 6 of this Article, Government Entities and Charities shall calculate the recoverable Input Tax as follows:

Government Entities and Charities shall calculate the percentage of the recoverable Input Tax pursuant to Clause 1 of Article 54, and Article 57 of the Decree-Law, to the total recoverable Input Tax and non-recoverable Input Tax for the Tax Period.
The percentage calculated under paragraph (a) of this Clause shall be rounded to the nearest whole number.
The percentage calculated under paragraph (b) of this Clause shall be multiplied by the amount of Input Tax referred to in paragraph (d) of Clause 6 of this Article to establish the recoverable portion of that Input Tax.

An input-based method is kept for these bodies. Their percentage is: recoverable input tax (under Article 54(1) and Article 57 of the Decree-Law) ÷ total recoverable and non-recoverable input tax for the tax period. It is then rounded and applied to residual input tax.

In effect, little changes for them. Government Entities and Charities keep a method very close to the one every business uses today. It applies from the same date as the new Clause 7.

Check which side of the line you are on. Both “Government Entity” and “Charity” are defined terms tied to Cabinet decisions. Bodies that do not fall within those definitions will move to the new turnover-based method like any other business.

Practical Example

ABC Charity is listed by Cabinet Decision for VAT recovery under Article 57. Its input tax for a quarter is :

	AED
On its relevant charitable activities (recoverable)	80,000
On its charity shop, which sells standard-rated goods (recoverable)	20,000
On residential flats it rents out (exempt, not recoverable)	25,000
Shared costs such as head office and audit (residual)	30,000

Recovery percentage: (80,000 + 20,000) ÷ (80,000 + 20,000 + 25,000) = 80%.

Recoverable share of shared costs: 80% × 30,000 = AED 24,000.

Under a turnover-based formula, the charitable activities would add nothing to the calculation because they produce no supply value, which would understate the charity’s recovery. That is why a separate method was needed.

9. Article 57(1) Capital Asset Definition reworded:

Under the Capital Asset Scheme, input tax on high-value, long-life assets is not fixed once and for all at the time of purchase. If the use of the asset changes between taxable and exempt / non-business use during the adjustment period (10 years for buildings, 5 years for other assets), the input tax is adjusted.

Old provision	New provision (from 1 October 2026)
1. A Capital Asset is a single item of expenditure of the Business amounting to AED 5,000,000 or more excluding Tax, on which Tax is payable and which has estimated useful life equal or longer than: a. 10 years in case of a building or a part thereof. b. 5 years for all Capital Assets other than buildings or parts thereof.	1. For the purposes of the Capital Asset Scheme referred to in Articles 12 and 60 of the Decree-Law, a Capital Asset is a business asset with a cost amounting to AED 5,000,000 or more, excluding Tax, on which Tax is payable and which has an estimated useful life equal or longer than: a. 10 (ten) years in case of a building or a part thereof. b. 5 (five) years for all Capital Assets other than buildings or parts thereof.

Old provision

New provision (from 1 October 2026)

1. A Capital Asset is a single item of expenditure of the Business amounting to AED 5,000,000 or more excluding Tax, on which Tax is payable and which has estimated useful life equal or longer than:

a. 10 years in case of a building or a part thereof.

b. 5 years for all Capital Assets other than buildings or parts thereof.

1. For the purposes of the Capital Asset Scheme referred to in Articles 12 and 60 of the Decree-Law, a Capital Asset is a business asset with a cost amounting to AED 5,000,000 or more, excluding Tax, on which Tax is payable and which has an estimated useful life equal or longer than:

a. 10 (ten) years in case of a building or a part thereof.

b. 5 (five) years for all Capital Assets other than buildings or parts thereof.

Relevance and impact:

The thresholds are unchanged. AED 5 million or more (excluding VAT), and a useful life of at least 10 years for buildings or 5 years for other assets.

The definition is now tied expressly to the Capital Asset Scheme under the Decree-Law.

The focus moves from the expense to the asset. “A single item of expenditure of the Business” becomes “a business asset with a cost”. In our reading, the test is now applied asset by asset: a single contract that covers several separate assets does not create a Capital Asset just because the contract value is above AED 5 million.

Practical Example:

Several assets under one contract. PQR LLC buys 12 identical trucks under one purchase contract for AED 6,000,000 (AED 500,000 each), each with a useful life of 8 years. Under the old wording, someone could argue that AED 6,000,000 was a “single item of expenditure” above the threshold. Under the new wording, each truck is a separate business asset costing AED 500,000, so none of them is a Capital Asset and the scheme does not apply.

One high-value asset. If PQR instead buys one automated warehouse sorting system for AED 5,400,000 with a useful life of 12 years, the system is a Capital Asset under both versions. If PQR later starts using the system partly for exempt activities within the 5-year adjustment period, it will need to adjust the input tax it originally recovered.

10. Article (60)(1)(a): Tax Credit Note wording corrected:

Article 60 lists what a tax credit note must contain.

Old Provision

New Provision

1. The Tax Credit Note shall contain all the following particulars:

a. The words “Tax Credit Note” clearly displayed on the invoice.

1. The Tax Credit Note shall contain all the following particulars:

a. The words “Tax Credit Note” clearly displayed on the credit note.

This fixes an obvious drafting slip. Article 60 is about the contents of a credit note, so the words “Tax Credit Note” belong on the credit note, not on an invoice.

Final thoughts on Cabinet Decision 149 of 2026:

The FTA expects VAT treatment to follow the real substance of a transaction and expects recovery claims to be backed by evidence.

The employee-expense changes, read with FTA Decision No. 17 of 2026, are already in force and are the ones most likely to show up in the next VAT return. The cash payment rule will start to apply as soon as the threshold is announced. The apportionment change is further away, but for partially exempt businesses it is likely to have the biggest financial effect.

If you would like us to review your recovery on employee costs, run your figures under the new apportionment method, or look over your contracts and invoice templates, our team will be happy to guide you.

Recent Insights

UAE VAT Return Gets a New Best Friend: How E-Invoicing is Changing Tax Compliance

UAE VAT: New Supplier and Supply Verification Requirements

UAE VAT Return Gets a New Best Friend: How E-Invoicing is Changing Tax Compliance

Technovisors — Tue, 06 Oct 2026 10:30:35 +0000

October 6, 2026

For UAE businesses, e-invoicing is not simply an IT upgrade. It is becoming an important part of VAT compliance, connecting the invoice issued by a business directly with the tax records it maintains and, consequently, its VAT returns.

As the UAE moves towards mandatory electronic invoicing for B2B supplies made locally and for exports as well, Federal Tax Authority (“FTA”) has amended the UAE VAT Law reshaping the documentation and reporting processes businesses currently practice.

The UAE Ministry of Finance (“MoF”) has described e-invoicing as a system designed to simplify, standardise and automate invoicing and tax reporting. Under the national model, businesses exchange invoices through Accredited Service Providers (“ASP”), with invoice data transmitted to and stored by the FTA.

What Changed for Tax Invoices?

One of the important steps towards e-invoicing came with Cabinet Decision No. 100 of 2025, which amended Articles 59 and 60 of The Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“Executive Regulations”)

For businesses operating under the e-invoicing framework, the option to issue a simplified tax invoice is no longer available. As a result, businesses that previously relied on simplified tax invoices for qualifying low-value transactions will need to prepare for full electronic invoices once those transactions fall within the e-invoicing requirements.

The change is particularly relevant for businesses with high volumes of transactions, as invoice systems will need to capture the required data consistently rather than relying on simplified formats.

What Changed for Tax Credit Notes?

Cabinet Decision No. 100 of 2025 amended Article 60 of the Executive Regulations. As a result, for electronic credit notes, certain information requirements that applied to traditional credit notes (such as original invoice amount, correct invoice amount and their difference) no longer apply in the same way.

In practical terms, businesses will need to ensure their ERP, accounting and billing systems can generate electronic credit notes in the required format and link them correctly to the underlying transaction as it directly affects the VAT reported by both the supplier and the recipient.

Supplies Under Reverse Charge Mechanism (RCM): No More Self-Invoicing

A separate VAT change took effect on January 1, 2026, under Federal Decree-Law No. 16 of 2025. Businesses applying the RCM are no longer required to issue a tax invoice to themselves for the relevant transactions. Instead, they must retain supporting documentation relating to the supply, as prescribed by the Executive Regulation.

The change removes a procedural step, but it does not remove the need for evidence. Businesses should still maintain a clear audit trail showing the nature of the transaction, the supplier, the VAT treatment and the basis on which the RCM was applied to ensure that the underlying commercial and tax documentation is complete and readily available for review.

Five-year Limit on Excess VAT Claims

Federal Decree-Law No. 16 of 2025 also introduced a five-year time limit for submitting requests to recover certain excess refundable tax after reconciliation. According to the MoF, once the five-year period expires, the right to reclaim the relevant excess tax expires. Further, giving power to the FTA to deny input VAT recover for transactions linked to tax evasions and the recipient knew or should have known.

Businesses should periodically reconcile VAT accounts, investigate old refundable balances and establish internal controls to ensure that eligible claims are submitted within the applicable period.

Where E-Invoicing Fits Into the VAT Return

This is where e-invoicing becomes more than an invoicing project. Under the UAE’s electronic invoicing framework, invoices and credit notes will be issued and exchanged as electronic data rather than documents that simply remain within an accounting system. This creates a much closer connection between the transaction, the VAT treatment, the accounting records and the eventual VAT return.

The UAE’s e-invoicing system is based on the OpenPeppol framework and uses ASP to facilitate the exchange of electronic invoices. The MoF has stated that the system is intended to improve transparency, reduce manual intervention and enhance tax compliance.

For businesses, this means that VAT errors can no longer be viewed solely as issues arising at the VAT return stage. An error in customer data, VAT classification, invoice fields, or credit-note processing may originate much earlier in the transaction lifecycle and ultimately affect the accuracy of the VAT return.

The Clock is Already Ticking

The UAE began its e-invoicing pilot on July 1, 2026, with mandatory implementation being introduced in phases. For businesses with annual revenue of AED50 million or more, the deadline to appoint an ASP has been extended to October 30, 2026, while mandatory e-invoicing implementation remains scheduled for January 1, 2027. Businesses with annual revenue below AED50 million are required to appoint an ASP by March 31, 2027 with mandatory e-invoicing implementation scheduled to commence on July 1, 2027.

The Ministry of Finance (MoF) has also introduced specific penalties for non-compliance. Cabinet Decision No. 106 of 2025 provides for a monthly penalty of AED 5,000 for failing to implement the e-invoicing system or appoint an ASP within the prescribed timeframe. Additional penalties may apply for the late issuance of electronic invoices and credit notes.

What Businesses Should Do Now

The most important step is to treat e-invoicing as a tax transformation project, rather than simply a software implementation.

Businesses should:

Review their existing tax invoice and tax credit-note processes;
Assess the VAT treatment and tax position of each type of transaction;
Identify transactions that currently use simplified tax invoices;
Review how zero-rated supplies and out of scope supplies are documented and reported;
Review reverse-charge transactions and ensure that the required supporting documentation is maintained;
Reconcile outstanding input VAT and refundable balances;
Assess whether their ERP and accounting system can capture all required electronic invoice data;
Review and update customer and supplier master data to ensure that the information required for e-invoicing is complete and accurate;
Select and onboard an Accredited Service Provider (ASP) within the applicable deadline; and
Test how electronic invoice data will flow into VAT reporting, reconciliation and compliance processes.

The UAE’s transition to e-invoicing will ultimately bring VAT compliance closer to the underlying transaction itself.

For businesses, this shift has the potential to make VAT reporting more accurate, efficient, and automated. At the same time, it leaves less room for weak documentation, inaccurate master data, inconsistent VAT treatment, or manual workarounds.

In this new environment, the VAT return has, in effect, gained a new best friend: the electronic invoice. The businesses that ensure their electronic invoices, accounting records, VAT treatment, and VAT returns all tell the same story will be better positioned to navigate the UAE’s next phase of digital tax compliance.

Recent Insights

UAE VAT Amendments as Per Cabinet Decision No. 149 of 2026

UAE VAT: New Supplier and Supply Verification Requirements

UAE Corporate Tax Calculator 2026

Technovisors — Thu, 10 Sep 2026 06:49:21 +0000

Client & Tax Period

Name of the client

Legal Type

Tax Period

Computation of CT Liability

Net Profit

Net profit / (loss) as per financials

Less: Exempt Income / Other Items

1. Dividend income

2. Capital gains

3. Gains excluded as per MD 120

Total exempt / excluded0.00

Add: Items Disallowed

1. Donations paid to unapproved charity

2. Administrative penalties

3. VAT paid

4. Bribes

5. Entertainment expenses

6. Interest expenses

7. Prior period items

Total disallowed (added back)0.00

Taxable income0.00

Set off of Losses

Set off of losses (up to 75% of taxable income)

Maximum allowed (75%): 0.00

Loss set-off entered exceeds 75% of taxable income.

Net taxable income0.00

Tax Computation

Rate on income up to AED 375,000

Rate on income above AED 375,000

Tax on income up to AED 375,0000.00

Tax on income above AED 375,0000.00

Tax liability0.00

Less: Foreign Tax Credit (lower of)

1. Tax paid in foreign jurisdiction

2. Tax payable in UAE

Foreign tax credit0.00

Summary

Net profit / (loss)0.00

Less: exempt income0.00

Add: disallowed items0.00

Taxable income0.00

Less: loss set-off0.00

Net taxable income0.00

Tax liability0.00

Less: foreign tax credit0.00

Final Tax Liability (AED)

0.00

The PDF opens as a separate, report-only document containing the FAME Advisory logo. The calculator screen itself is not captured. History is kept in your browser and persists on this device when you open the downloaded file locally.

History

No saved computations yet. Fill the form and tap “Save to History”.

FAME Advisory | www.fame.ae | hemang@fame.ae | +971 52 6559480

This free UAE Corporate Tax Calculator tells you what your business owes for the 2026 tax year in about a minute. Enter your net profit, adjust for exempt income and disallowed expenses, apply any loss relief and foreign tax credit, and the tool returns your taxable income, net taxable income, corporate tax, and final payable amount, ready to download as a PDF or CSV.

What you will learn on this page:

How UAE Corporate Tax is calculated, step by step, using the same method the Federal Tax Authority expects.
Which income is exempt, and which expenses are you not allowed to deduct?
How the 0% and 9% rates work, and how loss relief and foreign tax credit lower the bill.
A full worked example you can copy with your own figures.
Straight answers to the questions UAE businesses ask most about corporate tax.

Built and reviewed by the corporate tax team at FAME Advisory, a UAE advisory firm led by Nirav Shah. Last updated July 2026.

UAE Corporate Tax Calculator

The calculator does the arithmetic that trips most people up. You give it the numbers from your financial statements, and it walks you through every stage of a proper corporate tax computation, from accounting profit down to the final amount payable. Nothing is assumed on your behalf, and nothing is buried in a formula you cannot see.

Every figure it produces is based on the corporate tax rules in force in the UAE right now: a 0% rate on the first AED 375,000 of taxable income, 9% on the rest, a 75% cap on loss relief, a foreign tax credit set at the lower of the tax you paid abroad and the UAE tax on that income, and the Article 18 Qualifying Free Zone Person treatment for Free Zone companies. When those rules change, the tool changes with them, so you are never working from a figure that quietly went out of date.

You get more than a single number. The calculator generates a complete computation summary that mirrors the layout of a tax working paper, so you can see exactly how each adjustment moved the result. Save it, export it to PDF for your records, or download it as CSV to drop into your own spreadsheet.

The real point of the tool is confidence. When you file a return, or brief a client, or plan next quarter’s cash, you want to know the number is right and that you can show how you reached it. Because every line in the summary traces back to a figure you entered, a result that looks off can be followed back to its input and corrected in seconds. That is what separates a calculator you trust from one you second-guess.

What Is UAE Corporate Tax?

UAE Corporate Tax is a federal tax on the profit a business earns. It starts from the net profit in your financial statements, adjusts that figure for a short list of specific items, and applies a rate of either 0% or 9%. Most companies in the country now fall within its scope, which is why understanding the basics is no longer optional for anyone running a business here.

Overview of UAE Corporate Tax

The tax was introduced by Federal Decree-Law No. 47 of 2022 and applies to financial years starting on or after 1 June 2023. A business with a calendar-year end was first taxed in the 2024 year, with the return due by 30 September 2025. It is administered by the Federal Tax Authority (FTA) through the EmaraTax portal, and the return is filed within nine months of the end of your tax period.

For most owners, the practical change is smaller than it sounds. You already prepare financial statements, and corporate tax simply asks you to take that profit, make a defined set of adjustments, and apply a low rate. There is no separate set of tax books to keep and no need to reinvent your accounting. The work sits in getting the adjustments right, which is exactly where a structured calculator earns its place.

It also helps to see the rate in context. At 9%, the UAE headline rate is less than half the OECD average of roughly 23.5%, and the first slice of every company’s profit is taxed at nothing at all. The system was designed to bring the country in line with international standards while keeping it one of the most competitive places in the world to run a business. Knowing that tends to change the conversation from dread to planning.

Who Needs to Pay Corporate Tax?

Corporate tax reaches most businesses that operate through a UAE licence:

Mainland companies and other UAE-incorporated entities are taxed on their profit.
Free Zone companies, which remain within scope even when part of their income is taxed at 0%.
Non-resident businesses with a permanent establishment or UAE-sourced income.
Individuals running a licensed business where annual turnover passes AED 1 million.

Registration is a separate duty from payment. Even a loss-making or 0%-rated business generally has to register with the FTA and file a return, and missing the registration deadline carries its own fixed penalty regardless of whether any tax is due. Salary, personal investment income, and property held in your own name sit outside corporate tax altogether.

A few bodies are outside the system, such as government entities and certain qualifying investment funds and public-benefit organisations, but many of these still face registration or filing duties. For an ordinary trading company, the safest assumption is simple: you must register, file, and calculate your position every year, whether or not any tax turns out to be payable. Working the number out early, rather than in the final weeks before the deadline, leaves room to gather evidence for your exemptions and to plan the cash.

Corporate Tax Rates in the UAE

There are two headline rates, plus a special position for qualifying Free Zone income.

Taxable income band	Rate	Who does it apply to
Up to AED 375,000	0%	All taxable persons (mainland and free zone)
Above AED 375,000	9%	The portion of taxable income over the threshold
Qualifying income	0%	Qualifying Free Zone Persons who meet all conditions
Non-qualifying income	9%	Free Zone income that falls outside the qualifying rules

← Swipe to see more →

A Qualifying Free Zone Person can keep the 0% rate on qualifying income, but only while it meets every condition for that status. Income that falls outside those rules is taxed at 9%. The calculator handles this for you: select Free Zone Company and it asks the Article 18 question directly, then taxes qualifying income at 0% and any non-qualifying income at 9%, so both mainland and Free Zone users get an accurate figure rather than a rough guess.

The two-tier design deliberately rewards smaller businesses. A company with AED 375,000 of taxable income or less pays nothing, and one earning just above the line pays 9% only on the slice over it. This is why the exact taxable-income figure matters so much. A modest change in a single adjustment can move you across the threshold or shift how much of your profit sits in the 9% band, and that is precisely the kind of detail the calculator keeps accurate for you.

How to Use This Corporate Tax Calculator

The tool follows the same order as a tax accountant would. Work down the fields in sequence, and the summary updates as you type, so you are never left wondering what a change did to the result.

Step 1: Enter Client Information

Start with the details that label the computation:

Client Name: the business the calculation is for. It appears in the PDF and CSV.
Legal Type: mainland or Free Zone company. Selecting Free Zone Company opens one more question that decides how your tax is calculated.
QFZP question: Free Zone companies are asked whether they meet all the conditions under Article 18 of the Corporate Tax Law to be a Qualifying Free Zone Person. Answer Yes and qualifying income is taxed at 0%, with any non-qualifying income taxed at 9% and no AED 375,000 relief. Answer No and the calculator proceeds with the standard computation.
Tax Period: the financial year you are calculating, chosen from a drop-down list, for example, 1 Jan 2026 to 31 Dec 2026.

The name and the period do not change the maths, but they make the output usable; the Legal Type and the QFZP answer do, so set those first. A saved computation labelled with the client and the period is something you can find again, hand over, and trust months later when the detail has faded from memory. If you manage several entities, this is what stops one calculation from being mistaken for another.

Step 2: Enter Net Profit

Enter the net profit or loss shown in your financial statements, prepared under IFRS or IFRS for SMEs. This is the single most important number because every later adjustment builds on it. A loss can be entered too, and the calculator carries it through correctly rather than treating it as zero.

Use the final profit figure after all your normal accounting entries, not a rough management estimate. If your accounts are still in draft, the calculator is ideal for a provisional view: save it now, then reopen and update the number once the statements are signed off. That way, your early planning and your final filing both come from the same clear method.

Step 3: Deduct Exempt Income

Some income sits inside your accounting profit but is not taxed. You remove it here so you are not taxed on money that the law has already exempted. The calculator has fields for:

Dividend income: dividends from UAE companies are exempt, and qualifying foreign dividends are exempt under the participation exemption.
Capital gains: gains on qualifying shareholdings can be exempt where the participation conditions are met.
Exempt gains: gains excluded under the relevant ministerial rules, such as certain restructuring or holding situations.
Other excluded income: any further amount that qualifies for exemption in your case.

Exempt income is where careful businesses save the most and where rushed ones lose out. Dividends between UAE companies, for example, are exempt with no minimum holding, while foreign dividends and share gains depend on conditions such as a 5% stake and a 12-month holding period. Enter the amounts you are confident qualify, and treat anything borderline as a question for your adviser rather than a guess in the box. Getting this step right is often worth far more than any amount of haggling over small expenses.

Step 4: Add Disallowed Expenses

The mirror image of exempt income. Certain costs reduce your accounting profit but are not deductible for tax, so you add them back. The calculator includes a field for each of the items below.

Donations:

Donations only reduce your tax when they go to a body the UAE has approved for the purpose. Amounts given to any other recipient are added back. Keep the approval status of each recipient on file, because that record is what turns a donation into a deduction if the return is ever reviewed.

Administrative Penalties:

Fines and penalties, including tax and regulatory penalties, are never deductible. The system is not designed to share the cost of a penalty with the taxpayer. That includes late-filing and late-payment penalties, which is one more reason to calculate and file on time.

VAT Paid:

Recoverable input VAT is not a business expense, so any VAT that has been claimed back or is recoverable does not belong in your tax-deductible costs. Only genuinely non-recoverable VAT that has been carried as a cost may stay in your deductible expenses.

Bribes:

Illicit payments such as bribes and kickbacks are disallowed in full. This field exists so a proper computation captures them rather than quietly leaving them in profit. Facilitation payments fall in the same category, regardless of local practice in other markets.

Entertainment Expenses:

Client and business entertainment is only partly deductible. The portion that is not allowed is added back here, so the taxable figure reflects the restriction. As a working rule of thumb, expect only around half of qualifying business entertainment to be deductible, with the balance added back.

Interest Expenses:

Interest is deductible only within the limits set by the corporate tax rules. Any interest above those limits is added back so it does not understate the tax due. Groups with significant financing should pay particular attention here, because this is where the largest single adjustment often arises.

Prior Period Adjustments:

Items that belong to an earlier year, or corrections booked in the current accounts, are adjusted here so each period carries its own tax result. Keeping periods clean also makes your year-on-year comparisons meaningful rather than distorted by one-off catch-ups.

These fields match the calculator one for one. Fill in only the ones that apply to you and leave the rest at zero. The aim of the add-backs is not to inflate your tax, but to reflect the rules honestly, because a return that leaves non-deductible costs sitting in profit is exactly the kind of thing a review tends to find.

Understanding Taxable Income

Taxable income is the figure to which the tax rate is actually applied. It is not your revenue, and it is not your accounting profit. It is your profit after the exemptions and add-backs above, and it is the number every rate, cap, and credit key off. Understanding it is the difference between a figure you can defend and one you are simply hoping is close.

How Taxable Income Is Calculated

The formula is short, and the calculator runs it for you every time you change a number:

Taxable Income = Net Profit − Exempt Income + Disallowed Expenses

In practice, almost all of the effort goes into the two middle lines. Exemptions pull genuine but tax-free income out of the base, and add-backs put non-deductible costs back in. Everything else is straightforward once those two are settled.

Get this figure right, and the rest of the computation is mechanical. Get it wrong, usually by missing an exemption or an add-back, and every number after it is wrong too. That is the main reason to let a tool handle the arithmetic: it keeps both lists in front of you, totals them, and shows the taxable income the instant you finish, so you can watch how each entry shifts the result instead of waiting for a final tally and hoping it balances.

Loss Set-Off Rules

Losses are one of the most valuable things a young or cyclical business owns, and the rules let you carry them forward and put them to work against future profits. The only real skill is using them within the limits the law sets, which is a piece of arithmetic the calculator handles for you.

What Is Tax Loss Relief?

If your business made a loss in an earlier year, you do not simply lose it. You can carry that loss forward to reduce taxable profit in a later year. This is tax loss relief, and it prevents a business from being taxed heavily in a good year that follows a bad one.

It matters most to startups, which often run losses in their early years before turning profitable. Those early losses become a genuine asset on the tax side: they reduce the tax due once the business finds its feet, smoothing what could otherwise be a harsh first tax bill. Treated properly, a loss is not just a bad memory; it is money that the tax system will let you recover against future success.

75% Loss Utilisation Limit

There is a ceiling. In any year, carried-forward losses can offset no more than 75% of that year’s taxable income. So even a company with large past losses still pays tax on at least a quarter of a profitable year. The remaining losses are not lost; they stay available for future years.

The logic is that a consistently profitable business should always contribute something, even while it works through old losses. Because the unused portion carries forward, the full loss can still be relieved over time, just spread across more years. Deciding how much to use in a given year is a small but real planning lever, and the calculator lets you test different amounts on the spot to see the effect on the final bill.

How the Calculator Applies the Limit

You enter the loss you want to set off, and the calculator checks it against the 75% cap. It shows the maximum allowable amount for your figures and flags the entry if you try to use more than the rules allow, so your computation stays within the limit without you having to work out the percentage by hand.

You stay in control of the figure, but you never have to trust your own mental maths on the cap. The ceiling sits right next to the field, and the warning appears the moment an entry goes over it, so a genuine slip is caught on screen rather than in a return you have already filed.

Corporate Tax Rates Applied

Once you have your net taxable income, applying the rates is the simplest part of the whole exercise, provided you apply them the way the law intends. The errors that happen here are not complicated, but they are expensive, so it is worth being precise about how the two bands work.

Tax on First AED 375,000

The first AED 375,000 of taxable income is taxed at 0%. This band gives smaller businesses real breathing room, and it applies to everyone, so every taxpayer benefits from it before the 9% rate starts.

It is worth stressing that this band belongs to every taxpayer, not just small ones. Whether your taxable income is AED 400,000 or AED 40 million, the first AED 375,000 is always taxed at nothing. The cleanest way to think about it is as a fixed relief that comes off the top before the 9% rate touches a single dirham.

Tax Above AED 375,000

Only the income above AED 375,000 is taxed at 9%. A company with AED 800,000 of taxable income, for example, pays 9% on AED 425,000, which is AED 38,250. The threshold is not a cliff: you are never taxed on the first AED 375,000, whatever your total.

This is also why splitting a business into two companies to double the threshold does not work. The authorities can treat an artificial split as a single arrangement and tax it accordingly. The honest and durable way to reduce the 9% burden is to get the earlier steps right, through legitimate exemptions, allowable deductions, and loss relief, all of which the calculator already captures in the correct order.

Custom Tax Rate Options

The calculator sets the standard 0% and 9% rates by default, but both are configurable, which suits anyone who wants to stress-test a scenario before committing to it. Free Zone users get more than a rate field: answering Yes to the QFZP question switches the tool into a dedicated mode that taxes qualifying income at 0% and any non-qualifying income at 9%, with no AED 375,000 relief on the non-qualifying slice.

Being able to set the rate also makes the tool genuinely useful in planning conversations. You can put qualifying and non-qualifying Free Zone income side by side, or show a client what a change in their circumstances would mean for the bill, all without editing a single spreadsheet formula. Change the rate or the QFZP answer and the entire computation recalculates instantly.

Foreign Tax Credit

If your business only earns in the UAE, you can skip this section. If any of your income has been taxed in another country, the foreign tax credit is how you avoid paying for the same profit twice, and it is worth understanding before you assume anything about your final number.

What Is Foreign Tax Credit?

If your UAE company has already paid tax abroad on income that is also taxed here, a foreign tax credit reduces your UAE bill by the tax paid overseas. It exists to stop the same income being taxed twice.

Cross-border income is increasingly common for UAE businesses, from consultancy fees earned abroad to returns on overseas operations. Where another country has already taxed that income, the credit recognises the tax you have paid and lowers your UAE liability by a matching amount, so the total you hand to both governments is fair rather than duplicated. For a regional hub economy, this is a core part of keeping business competitive.

Lower-of Rule

The credit is not unlimited. It is capped at the lower of two amounts:

the foreign tax actually paid, and
the UAE corporate tax payable on that same income.

So if you paid more tax abroad than the UAE would charge, you can only claim up to the UAE amount. The cap protects the UAE tax base while still relieving genuine double taxation: the UAE will credit foreign tax, but only up to what it would have charged on that income itself. Any excess foreign tax is not refunded here, which is a useful thing to know before you assume a large overseas bill will wipe out your UAE position. The calculator applies the lower-of test automatically and shows the exact credit it allows, so you never overstate the claim.

Final Corporate Tax Liability

Once every input is in, the calculator brings the whole computation together and presents each stage on one screen:

Taxable income after exemptions and add-backs.
Net taxable income after loss relief.
Corporate tax from the 0% and 9% bands.
Foreign tax credit under the lower-of rule.
Final payable tax, the amount you would actually owe.

Seeing the whole chain in one view is what turns a calculation into something you can act on with confidence. You are not left holding a single figure and a leap of faith; you can point to each stage and say why it is what it is, which is exactly the position you want to be in before you file or advise.

That transparency is practical as well as reassuring. When a client questions a number, or an auditor asks how you arrived at it, the summary is your answer. Export it, attach it to your working papers, and the reasoning travels with the result instead of living only in your head.

Features of This UAE Corporate Tax Calculator

Automatic Tax Computation

Every field recalculates the result the moment you change it. There are no buttons to press and no formulas to maintain. That also means you can experiment freely: nudge an add-back, adjust a loss, change the rate, and watch the final figure respond, which makes the tool as good for planning as it is for a one-off calculation.

Summary Dashboard

A clear panel shows the full computation from net profit to final tax, so the whole picture is in front of you at once. Nothing is hidden behind an extra click. The layout follows the order of a proper computation, so reading it from top to bottom is the same as reading the logic of your tax position.

Save Multiple Calculations

Working across several companies or scenarios? Save each one and come back to it without starting over. This is built for advisers and finance teams juggling more than one entity, and for owners comparing this year with last, or a cautious scenario against an optimistic one.

Export PDF Report

Download a clean, branded PDF of the computation for your files or to share. The report carries the FAME Advisory logo and contact details, and it is designed to look like a document you would be comfortable sending to a client, not a screenshot. Because only the report is exported, the working controls never end up in your records.

Download CSV

Export the figures as CSV to drop straight into Excel or your accounting workpapers. From there you can slot them into a larger model, reconcile them against your ledger, or keep a lightweight audit trail, all without retyping a single number.

Calculation History

Your saved computations are kept in a history list, so you can reload, review, or re-export a past calculation whenever you need it. Nothing you save is lost between visits on the same device, so the tool doubles as a simple, private record of the positions you have worked through.

Example Corporate Tax Calculation

Here is a realistic example, worked exactly the way the calculator does it. Suppose a company reports AED 1,200,000 of net profit, receives AED 150,000 of exempt dividends, has AED 75,000 of disallowed expenses, sets off AED 300,000 of prior losses, and has paid AED 10,000 of tax abroad.

Particulars	Amount (AED)
Net profit as per financials	1,200,000
Less: Exempt income (dividends)	(150,000)
Add: Disallowed expenses (penalties, entertainment, donations)	75,000
Taxable income	1,125,000
Less: Loss set-off (within the 75% cap of 843,750)	(300,000)
Net taxable income	825,000
Tax on first AED 375,000 at 0%	0
Tax on AED 450,000 at 9%	40,500
Corporate tax liability	40,500
Less: Foreign tax credit (lower of AED 10,000 and AED 40,500)	(10,000)
Final corporate tax payable	30,500

← Swipe to see more →

The company ends up with a final corporate tax bill of AED 30,500. Notice how much the exempt income, the loss relief, and the foreign tax credit moved the number. Skip any one of them and you would overpay. Swap in your own figures and the calculator produces your version of this table in seconds.

Common Mistakes When Calculating Corporate Tax

The rules themselves are not the hard part. Most errors come from small oversights in the arithmetic, and every one of them is avoidable. Here are the five that come up most, and how the calculator guards against each.

Forgetting Exempt Income

Leaving exempt dividends or qualifying gains inside taxable profit is one of the most common and most expensive errors. It inflates the tax base and the bill. The calculator gives exempt income its own step so it is not overlooked, and a quick habit helps too: list every material receipt for the year and ask, one by one, whether it is genuinely taxable.

Missing Disallowed Expenses

The reverse mistake understates tax. Penalties, non-deductible interest, and the restricted part of entertainment all have to be added back. Omit them and the figure is wrong, which is a problem if the FTA reviews the return. A quick scan of your expense ledger for fines, penalties, and entertainment before you file is usually enough to catch them.

Incorrect Loss Utilisation

Applying more than 75% of taxable income in losses, or setting off losses a business is not entitled to, produces a figure the rules do not support. The built-in cap check keeps loss relief within the limit and shows you the ceiling as you go, so the mistake is hard to make in the first place.

Ignoring Foreign Tax Credits

Businesses that paid tax abroad sometimes forget to claim the credit and simply pay twice. Others claim more than the lower-of rule allows. Both are avoidable when the credit is calculated for you. Keep the foreign tax receipts on file, because they are the evidence that supports the credit if it is ever questioned.

Applying the Wrong Tax Rate

Taxing the whole profit at 9%, or assuming Free Zone status makes all income tax-free, are frequent slips. The correct treatment applies 0% to the first AED 375,000 and 9% above it, with qualifying Free Zone income handled on its own terms. When in doubt, apply the standard bands and confirm any Free Zone 0% treatment separately, rather than the other way round.ome from small oversights in the arithmetic, and every one of them is avoidable. Here are the five that come up most, and how the calculator guards against each.

Benefits of Using an Online Corporate Tax Calculator

Saves time: a full computation in minutes instead of an afternoon in a spreadsheet.
Reduces manual errors: the arithmetic and the caps are handled for you.
Supports tax planning: model different scenarios before you commit to anything.
Instant calculations: results update the moment a number changes.
Downloadable reports: PDF and CSV output for files, clients, and auditors.
Easy record keeping: saved history keeps every computation in one place.

Who Can Use This Calculator?

The tool is built for anyone who needs a fast, accurate view of a corporate tax position:

SMEs working out what they owe for the year.
Startups planning cash flow around a first tax bill.
Mainland companies of every size.
Free Zone companies modelling qualifying and non-qualifying income.
Accountants preparing computations for clients.
Tax consultants running quick checks and scenarios.
CFOs reviewing the numbers before sign-off.
Finance managers handling compliance in-house.

Frequently Asked Questions

How is UAE Corporate Tax calculated?

You start with your accounting net profit, remove exempt income such as qualifying dividends, add back disallowed expenses such as penalties, apply any loss relief, and then apply the rate: 0% on the first AED 375,000 and 9% above it. A foreign tax credit can reduce the final amount.

What is taxable income?

Taxable income is your profit after the tax adjustments. It equals net profit minus exempt income plus disallowed expenses. It is the figure the corporate tax rate is applied to, not your total revenue.

What income is exempt from Corporate Tax?

Common exemptions include qualifying dividends, gains on qualifying shareholdings under the participation exemption, and certain other amounts the law excludes. Exempt income is removed before the rate is applied.

Are dividends taxable?

Dividends from UAE companies are exempt from corporate tax. Dividends from foreign companies are also exempt when they meet the participation exemption conditions, such as the ownership and holding-period tests.

Can tax losses be carried forward?

Yes. Losses can be carried forward and used against future taxable income, but the offset in any year is capped at 75% of that year’s taxable income. The unused portion stays available for later years.

What expenses are not deductible?

Fines and administrative penalties, bribes, recoverable VAT, donations to non-approved bodies, interest above the deduction limits, and the restricted part of entertainment are all added back when computing tax.

What is a foreign tax credit?

It is a credit for tax you already paid abroad on income that is also taxed in the UAE. The credit is limited to the lower of the foreign tax paid and the UAE tax on that income, which prevents double taxation.

What is the UAE Corporate Tax rate?

The standard rate is 0% on taxable income up to AED 375,000 and 9% on the amount above it. Qualifying Free Zone income can be taxed at 0% where all the conditions are met.

Can Free Zone companies use this calculator?

Yes. Free Zone companies are within the corporate tax system. Select Free Zone Company and the calculator asks whether you qualify as a QFZP under Article 18: answer Yes and qualifying income is taxed at 0% with any non-qualifying income at 9%, answer No and the standard computation applies.

Is this calculator free?

Yes. The UAE Corporate Tax Calculator is free to use, with instant results and PDF and CSV export at no cost.

Calculate Your UAE Corporate Tax Now

You do not need a spreadsheet or a tax degree to see where you stand. Enter your numbers and the calculator returns your taxable income, net taxable income, corporate tax, and final payable amount instantly, then lets you export the whole computation as a PDF or CSV for your records.

It is the quickest way to turn a set of accounts into a clear tax figure you can act on. Try it now, and when you want a second opinion on the treatment of a specific item, the team at FAME Advisory is here to help.

UAE VAT: New Supplier and Supply Verification Requirements

Technovisors — Tue, 01 Sep 2026 09:27:27 +0000

September 1, 2026

Effective from 1 October 2026

FTA Decision No. 13 of 2026 introduces enhanced due-diligence requirements before businesses claim input VAT

The Federal Tax Authority (“FTA”) has issued Decision No. 13 of 2026 – Measures, Procedures and Conditions Required by Taxable Persons for the Verification of the Validity and Integrity of Supplies Before Deduction of Input Tax.

The Decision, issued on 22 July 2026, will come into effect from 1 October 2026 and introduces a more structured framework for taxable persons to verify both their suppliers and the underlying supplies before claiming input tax.

The new requirements are particularly relevant to finance, procurement, accounts payable and tax teams, as businesses can no longer rely solely on the availability of a valid tax invoice. They will need to demonstrate that appropriate due-diligence procedures have been undertaken, and that adequate supporting evidence has been maintained.

Why is Supplier Verification Becoming Important?

Under Article 54(bis) of the UAE VAT Law, a taxable person must ensure that they did not know, and should not reasonably have known, that a supply formed part of a tax evasion arrangement before deducting input tax.

Decision No. 13 of 2026 provides greater clarity on the practical measures and conditions that taxable persons are expected to follow when verifying the validity and integrity of supplies.

In practice, this means businesses should strengthen their existing:

Vendor onboarding and KYC procedures
Procurement controls
Accounts payable processes
Supplier risk assessments
VAT review procedures
Documentation and record-keeping controls

The focus is therefore moving from an invoice-based approach to a broader supplier and transaction due-diligence approach.

Article 6 – Exceptions to the Verification Requirements

AED 10,000 and AED 100,000 thresholds

One of the key practical considerations under the Decision is the exception applicable to smaller taxable supplies.

The verification measures prescribed under the Decision are generally optional where the consideration for a taxable supply, excluding VAT, is less than AED 10,000.

However, this exception does not apply where the total value of supplies received from the same supplier:

Exceeded AED 100,000 during the previous 12 months; or
Is expected to exceed AED 100,000 during the next 12 months.

Practical implication

Businesses should therefore monitor supplier purchases on a rolling 12-month basis rather than assessing each invoice in isolation.

For example:

An individual taxable supply of AED 8,000 may fall within the AED 10,000 exception.
However, if purchases from the same supplier exceed AED 100,000 during the relevant 12-month period, the exception may no longer be available.
Accordingly, supplier-level spend monitoring will become an important part of the VAT control framework.

Article 3 – Verification of the Supplier

Know Your Supplier

For suppliers falling within the verification requirements, taxable persons are expected to undertake appropriate checks to establish the supplier’s identity and legitimacy.

Where the supplier is an individual

The taxable person should:

Obtain valid identification, such as an Emirates ID or passport; and
Meet the supplier either physically or virtually before the supply.

Where the supplier is a legal entity

The taxable person should verify the supplier’s incorporation through official databases or obtain appropriate incorporation documentation.

The information obtained should be valid and consistent with the supplier’s details, including its:

Legal name
Address
Business activities
Relevant employees or representatives

The identity of the authorised director, agent, or employee representing the supplier should also be appropriately verified.

This places greater emphasis on maintaining a robust vendor onboarding and KYC process.

Verify the Supplier's Physical Presence

Businesses are also expected to verify the supplier’s address and place of business.

This includes:

Confirming that the supplier has an actual place of business, through appropriate electronic means or, where appropriate, a physical visit; and
Assessing whether the supplier’s premises are reasonably compatible with the nature and scale of its business activities.

This is particularly relevant where the supplier’s stated business activities, transaction volumes, or operating model appear inconsistent with its physical presence.

Assess Supplier Risk Indicators

The Decision identifies certain circumstances that may indicate increased risk and therefore require closer consideration.

Frequent changes in address

A supplier changing its address more than twice during the preceding 12 months is identified as a risk indicator.

Frequent changes in key personnel

Frequent changes in key employees, including managers or individuals dealing with the taxable person, more than twice during the preceding 12 months, may also indicate increased risk.

Unusual or disproportionate transactions

Transactions that appear disproportionate or unusual when compared with the suppliers:

Business size
Transaction value
Transaction volume
Business history
Normal commercial activities

Should also be appropriately assessed.

Importantly, the presence of a risk indicator does not automatically mean that the transaction should be rejected.

However, businesses should undertake appropriate additional review and maintain a clear commercial explanation together with supporting evidence for the transaction.

Enhanced Verification for Suppliers Exceeding AED 375,000

Additional verification requirements apply where supplies received from a supplier exceed, or are expected to exceed, AED 375,000 during the previous or next 12 months.

For such suppliers, the taxable person is required to obtain written confirmation from an authorised UAE bank confirming that the supplier maintains a bank account, subject to the conditions specified under the Decision.

The decision also requires consideration of publicly available reviews and media coverage relating to the supplier from reliable sources.

For businesses dealing with high-value suppliers, this represents a significant expansion beyond traditional vendor documentation and invoice checks.

Article 4 – Verification of the Underlying Supply

Supplier verification is only one part of the new framework.

Businesses must also consider whether the actual supply received is genuine and commercially justified.

The taxable person is expected to undertake a general assessment of the transaction and consider whether the supplier’s involvement is supported by genuine commercial reasons.

Key considerations may include:

Whether the pricing and profit margin are commercially reasonable;
Whether the transaction is consistent with prevailing market conditions;
Whether the goods or services are consistent with the supplier’s ordinary or licensed business activities;
Whether the goods are genuine and their origin can be established;
Whether the supplier owns the goods or has the legal right to dispose of them; and
Whether any intermediary involved in the transaction has a clear and commercially justifiable role.

Verification for goods

Businesses should maintain appropriate commercial evidence, such as:

Purchase orders
Contracts
Goods receipt notes
Delivery documentation
Shipping records
Customs documentation, where applicable
Other relevant commercial records

Verification for services

Businesses should maintain sufficient evidence demonstrating that the services were actually performed and received, together with evidence of the commercial purpose and benefit of the services.

A tax invoice alone may therefore not be sufficient to establish the validity and integrity of the underlying supply.

Payment Arrangements Will Also Be Considered

The decision also addresses payment arrangements.

The method and terms of payment should be commercially justifiable and consistent with the nature of the transaction.

Where:

A third party makes or receives payment; or
Payment is made to a bank account outside the supplier’s country of incorporation,

The taxable person should have a reasonable commercial explanation supported by appropriate evidence.

Electronic payment is also expected. Where cash payments are made, businesses should maintain a documented commercial justification, comply with applicable tax-law requirements, and ensure that the transaction remains readily verifiable.

Accordingly, unusual payment arrangements should be treated as a potential tax compliance risk indicator, rather than merely an accounting matter.

Verification Should Be an Ongoing Process

Supplier verification should not be treated as a one-time onboarding exercise.

The Decision requires verification:

When dealing with a supplier for the first time; or
When dealing with an existing supplier where the supplier has not been verified during the preceding 12 months.

Businesses should therefore consider implementing a formal 12-month supplier re-verification cycle, supported by transaction-level controls.

Documentation and Audit Trail

One of the most important aspects of the Decision is the requirement to document the verification procedures undertaken and retain the relevant supporting records.

Businesses should consider maintaining an audit trail covering, as applicable:

Supplier identification and incorporation documents
Verification of authorised representatives
Supplier address and business-location checks
Supplier risk assessments
Bank confirmation for relevant high-value suppliers
Contracts and purchase orders
Goods receipt and delivery evidence
Service completion or acceptance evidence
Pricing analysis and commercial rationale
Payment records
Explanations for unusual transactions or payment arrangements
Evidence supporting the authenticity and origin of goods

The objective should be to ensure that the business can clearly demonstrate what checks were performed, when they were performed, by whom, and what evidence was considered.

What Should Businesses Do Before 1 October 2026?

With the Decision becoming effective from 1 October 2026, businesses should use the remaining implementation period to assess their current processes and identify any gaps.

Recommended Action Plan

1. Identify the supplier population:

Prepare a comprehensive supplier list and analyse purchases on a rolling 12-month basis.

2. Categorise suppliers by value:

Identify suppliers based on the relevant thresholds, including:

Supplies below AED 10,000 per taxable supply
Suppliers exceeding AED 100,000 on an aggregate basis
Suppliers exceeding AED 375,000 on an aggregate basis

3. Review vendor onboarding procedures:

Assess whether supplier identity, incorporation details, authorised representatives and business locations are adequately verified.

4. Introduce a supplier risk assessment:

Establish controls to identify changes in supplier addresses, key personnel, and unusual transaction patterns.

5. Strengthen transaction-level verification:

Ensure that contracts, purchase orders, delivery documents, service evidence and payment records adequately support the underlying transaction.

6. Establish enhanced verification procedures:

For suppliers exceeding the AED 375,000 threshold, introduce the additional bank confirmation and public-information review procedures required under the Decision.

7. Technology-driven approach:

A technology-driven approach should play a key role in this process, with accounting and tax systems configured to automatically monitor supplier transactions and identify alerts when the above threshold is approached or exceeded.

8. Develop a formal verification policy:

Clearly define the responsibilities of procurement, finance, accounts payable and tax teams, including review and approval responsibilities.

9. Maintain a centralised audit trail:

Ensure that verification records and supporting evidence are properly retained and can be readily retrieved if requested by the FTA.

Conclusion

FTA Decision No. 13 of 2026 represents an important development in the UAE VAT compliance framework.

The focus is moving beyond the traditional question:

“Do we have a valid VAT invoice?”

Businesses should now also consider:

“Have we taken appropriate and reasonable steps to verify the supplier, the transaction and the commercial substance of the supply before claiming input VAT?”

The Decision highlights the importance of strengthening supplier due diligence, procurement controls, accounts payable procedures, and VAT governance.

Businesses should therefore consider reviewing their existing processes before 1 October 2026 and implementing appropriate controls based on their supplier base, transaction volumes, and risk profile.

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Download GCC Tax and Other Regulatory Communique July 2026

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Technovisors — Wed, 19 Aug 2026 07:43:58 +0000

UAE VAT Applicability on Precious Metals & Stones

Technovisors — Mon, 03 Aug 2026 12:31:50 +0000

August 3, 2026

The UAE’s VAT framework treats precious metals and precious stones differently depending on the nature of the transaction, by assessing who is buying, who is selling, and for what purpose. Whether you are a jewellery manufacturer, a bullion trader, a gemstone wholesaler, or a retailer, understanding which VAT treatment applies to your transactions is essential to staying compliant and avoiding unnecessary costs.

This article breaks down the three key VAT treatments i.e. Zero Rating, Reverse Charge Mechanism (RCM), and Standard Rating.

What are included in Precious Metals and Precious Stones?

Precious metals include the following: Gold, silver, palladium, and platinum

Precious stones include Natural and synthetic diamonds, pearls, rubies, sapphires, and emeralds.

Zero Rating of Investment Grade Precious Metals

Certain precious metals are treated as financial instruments rather than ordinary goods. Accordingly, their supply and import attract VAT at 0%, yet the supplier retains the right to recover input tax on related costs.

Key conditions for zero-rating:

The metal must be gold, silver, palladium, or platinum.
It must have a purity of 99% or more.
It must be in a form tradeable in global bullion markets (e.g., bars, ingots, or coins that meet international trading standards).

Jewellery or other manufactured articles of these metals generally do not qualify for zero-rating under this provision.

Example: A UAE-based bullion dealer sells 1 kg gold bars (99.9% purity) to a registered jewellery manufacturer. The dealer issues a tax invoice at 0% VAT as the gold is a precious metal and the is traded in bullion form with a purity of 99.9%.

Applicability of Reverse Charge Mechanism (RCM)

For most business-to-business (B2B) transactions involving precious metals, precious stones, and jewellery within the UAE, the Reverse Charge Mechanism applies, provided certain conditions are satisfied.

For jewellery manufacturer and retailers, the key point to note that the RCM can be applied for jewellery made from these materials but only where the value of the precious component exceeds the value of all other elements such as clasps, settings, and packaging. If it does not, the RCM under CD 127/2024 does not apply.

Key conditions that must be met for RCM to be applied

For the RCM to apply, three conditions must be satisfied simultaneously:

The recipient must be VAT-registered in the UAE at the time of supply.
The recipient must intend to resell the goods or use them in the production or manufacture of precious goods.
The recipient must provide a written declaration to the supplier, before the date of supply, confirming both their VAT registration and their commercial intent.

The recipient must obtain and retain the declaration received from the supplier and verify the supplier’s Tax Registration Number (TRN) through the FTA’s online verification tool, while retaining evidence of such verification. Although no VAT is charged by the seller, a compliant Tax Invoice must still be issued, clearly stating that the Reverse Charge Mechanism (RCM) applies to the transaction.

How the Reverse Charge Works

Under the RCM, the VAT obligation shifts from the supplier to the recipient. The supplier does not charge or report VAT on the supply. Instead, the VAT-registered recipient self-accounts for VAT, reports it in their VAT return, and may recover it as input tax subject to standard recovery rules.

This mechanism applies to B2B transactions only. Supplies to unregistered end consumers fall outside the RCM and standard 5% VAT is applied for B2C unregistered consumers.

Example:

A diamond trader supplies lab-grown diamonds worth AED 500,000 to a VAT-registered jewellery company that intends to resell them. The jeweller provides the required written declaration. The trader issues a tax invoice with no VAT charged. The jeweller self-accounts for AED 25,000 (5%) under RCM by disclosing output VAT in its VAT return and simultaneously claim this as input tax, resulting in a net nil effect.

Standard Rating (5% VAT) — Retail and Non-Qualifying Transactions

When the conditions for zero-rating and RCM are not met, the supply of precious metals, precious stones, and jewellery is subject to standard VAT at 5%, which the supplier charges and remits to the FTA.

Common scenarios where standard rating applies:

Sales to unregistered individuals (retail / B2C transactions).
Sales to VAT-registered businesses that do not provide the required written declarations.
Sales where the recipient has no intention to resell or manufacture precious goods.

Example:

A jewellery retailer sells gold bangles to a walk-in customer (an unregistered individual). The retailer charges 5% VAT on the sale price and pays this to the FTA.
A VAT-registered company purchases sapphires to use as corporate awards or gifts — not for resale or manufacture. Since the company does not intend to resell or use the stones in production, the RCM does not apply. The supplier charges 5% VAT.
A diamond dealer fails to receive a written declaration from the recipient before the supply. Even if the recipient is VAT-registered, the RCM cannot apply, and the dealer must charge standard 5% VAT.

Making Charges — A Nuance to Watch

Where a jeweller charges separately for manufacturing services (“making charges”), those services remain subject to standard 5% VAT. The RCM applies only to the precious goods component. If a single composite price is charged for both goods and services by the supplier to VAT registered customer the entire supply fall under the RCM provided all conditions are met.

Composite Supply

Following conditions shall be met for the supply to be treated as a composite supply.

The supply consists of a principal component (Precious Goods) and ancillary / incidental elements (including Making Services), closely linked that splitting them would be impossible or unnatural.
The price for the Precious Goods and related services is not charged separately. One combined price is stated.
The Precious Goods and all related services are supplied by the same supplier.

Sample Tax Invoice for Taxable Supply

Sample Tax Invoice for Composite Supply

Record-Keeping Requirements

Given the interplay between zero-rating, RCM, and standard rating, robust documentation is essential to support the VAT position taken on each transaction. The specific records to maintain vary depending on which treatment applies.

Zero-Rated Supply

Evidence that the metal is in a recognised tradeable bullion form (bars, ingots, or coins meeting international trading standards)
Compliant tax invoice reflecting 0% VAT.
Records supporting input tax recovery claimed against the zero-rated supply

Reverse Charge Mechanism (RCM)

The recipient’s written declaration confirming VAT registration and intent to resell or use the goods in production/manufacture, obtained before the date of supply
Evidence of TRN verification carried out via the FTA’s online tool, retained by the supplier
A compliant tax invoice issued despite no VAT being charged, clearly mentioning VAT will be accounted by customer on behalf of supplier under RCM
Records distinguishing separately-invoiced making charges (standard-rated) from composite pricing (fully under RCM), where applicable

Standard Rated Supply

Compliant tax invoice showing VAT charged at 5% on the full consideration
Records of the customer’s registration status (or confirmation of non-registration for B2C sales)
Where a declaration was requested but not obtained, records evidencing that RCM could not be applied, justifying standard rating
Records of VAT collected and remitted to the FTA in the relevant tax period

All of the above should be retained for the statutory five-year period (or longer where applicable) and be readily available for FTA audit, as the burden of proof for zero-rating, RCM, or input tax recovery rests with the taxpayer.

Conclusion

The VAT treatment of precious metals, precious stones, and jewellery in the UAE depends on the nature of each transaction and who is buying, for what purpose, and how the supply is structured, rather than the product alone. Zero-rating applies to qualifying investment-grade bullion, RCM shifts the VAT burden to registered recipients where all conditions and declarations are met, and standard 5% rating is the default otherwise. The making charges distinction is particularly important: whether these are invoiced separately or bundled into a single price can determine whether RCM extends to the whole supply or only its precious component. Businesses should review their invoicing practices and documentation carefully to apply the correct treatment and safeguard their input tax position.

Recent Insights

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Private Clarifications – UAE CT Alert

Technovisors — Fri, 17 Jul 2026 13:01:22 +0000

July 17, 2026

Background

The FTA published a consolidated set of UAE Corporate Tax Private Clarifications on 9 July 2026, covering rulings issued up to May 2026. The compilation touches a wide sweep of the Corporate Tax Law, from exempt persons, Permanent Establishment and Unincorporated Partnerships, through to Free Zone Qualifying Activities, Participation Exemption, Tax Groups, registration, financial statements and transitional relief.

Private Clarifications are issued by the FTA in response to a specific taxpayer’s request and are binding only on that taxpayer in relation to the facts submitted, unlike Public Clarifications, which apply more broadly. That said, the compilation offers a useful window into the FTA’s thinking on points the legislation itself does not spell out and can guide taxpayers facing similar fact patterns.

This alert provides our selection of the more practically significant clarifications from that compilation, with a short note on what each means. We are also pleased to mention that Fame Advisory has assisted clients in preparing and filing Private Clarification requests with the FTA, and certain favourable outcomes obtained in those cases have been included in the FTA’s compilation and are discussed in this alert.

Permanent Establishment

1. Absence of a trade licence or use of a third party does not rule out a UAE PE. Presence exceeding 6 months (aggregate) in a rolling 12-month period may indicate permanence, if premises are at the enterprise’s disposal and core (non-auxiliary) activities occur there.

What This Means: Not holding a UAE trade licence for the activity is not a defence — the FTA looks past licensing status to substance.

Unincorporated Partnership

2. A landowner-developer arrangement (written or oral) can be an Unincorporated Partnership where parties jointly conduct a development business and share profits.

What This Means: A development agreement dressed up as a simple service arrangement can still be reclassified as a partnership.

3. Failure to submit the annual declaration confirming Foreign Partnership conditions causes loss of tax-transparent treatment.

What This Means: A substantive condition, not routine paperwork.

Family Foundation

4. An LLC/private company investing for individuals is not a Family Foundation merely by purpose. A qualifying “similar entity” needs legal characteristics comparable to a foundation or trust.

What This Means: Purpose alone is insufficient — legal form and governance matter; ordinary corporate vehicles can’t access foundation transparency.

Qualifying Free Zone Persons

5. A QFZP must be a juridical person – a discretionary trust, natural person, Unincorporated Partnership or other non-juridical arrangement cannot qualify.

What This Means: Entity classification must precede the QFZP analysis; Free Zone licensing alone is not enough.

6. A branch has no separate legal identity, so head office and Free Zone branches are one Taxable Person for QFZP assessment — but each activity and its substance must still be tested individually.

What This Means: No standalone QFZP test per location, but every activity and its substance must be mapped and tested separately.

7. A Free Zone Person is not automatically disqualified where a related-party transaction was not recorded at arm’s length, provided an appropriate transfer-pricing adjustment is made in the Corporate Tax Return.

What This Means: A corrective mechanism at filing, not a safe harbour — the adjustment must be supportable and can affect Qualifying Income and de minimis.

Adequate Substance

8. No automatic substance exception for passive/asset-based leasing. A property-leasing Free Zone Person with no employees may fail where no one performs lease administration, compliance, renewals or enforcement.

What This Means: Owning an asset isn’t enough — the FTA looks for people, expenditure and decision-making behind the income.

9. Employees sponsored by Related Parties may count as the Free Zone Person’s qualified full-time employees if it bears their economic cost and controls/supervises the employment relationship.

What This Means: Visa sponsorship isn’t decisive — economic responsibility and day-to-day control matter more.

Adequate Substance (Contd.)

10. A shared workspace can satisfy adequate substance where sufficient and commensurate with the scale of core income-generating activities, alongside adequate people, assets and expenditure.

What This Means: A dedicated office isn’t mandatory, but a nominal flexi-desk may be inadequate for a business with real operations or staff.

11. Overseas warehousing/shipping doesn’t automatically disqualify high-seas or third-port distribution, provided core income-generating activities and substance remain in a Designated Zone.

What This Means: Physical movement of goods isn’t the sole test — what matters is where distribution decisions and CIGA actually happen.

12. A distributor’s customer is the Beneficial Recipient where legal ownership passes and goods are at the customer’s free disposal, including an unrestricted right to resell, with no obligation to do so.

What This Means: Legal title alone isn’t enough — genuine, unrestricted control confirms Beneficial Recipient status and Qualifying Income.

Processing of Goods and Materials

13. Processing is broader than manufacturing — the product doesn’t need to be physically transformed into something new. Simple packaging or re-packaging of goods can itself qualify as “processing,” provided the activity is genuinely carried out in the Free Zone.

What This Means: Don’t assume packaging-type activities fall outside Qualifying Income just because the product itself isn’t changed. But the actual packaging work must physically happen in the Free Zone.

Trading of Qualifying Commodities

14. Buying and selling physical Qualifying Commodities is a Qualifying Activity, but speculative derivative trading (futures, options, swaps) is not, unless the derivatives are used to hedge price risk from the trader’s own physical commodity business, or from related structured commodity financing.

What This Means: A standalone derivatives/proprietary trading desk cannot claim Qualifying Activity status just because the underlying reference is a commodity. The derivatives must be genuinely tied to hedging real physical trading risk — not speculative positions on their own.

Holding of Shares and Securities

15. Selling shares within 12 months of buying them doesn’t automatically disqualify the holding from being treated as an investment. What matters is the original intention, if the shares were genuinely acquired to be held for 12 months or more, an early exit doesn’t break qualification. For discretionary investment portfolios, that intention can be assessed at the level of the overall investment mandate, rather than each individual holding.

What This Means: Actual holding period is evidence, not the sole test — a well-governed mandate can support early disposals driven by risk/market decisions.

Ownership, Management & Operation of Ships

16. Time chartering can qualify without direct ship ownership. Ownership, management and operation are independent limbs, provided functions are substantively carried out by the Free Zone Person.

What This Means: A Free Zone Person can qualify by genuinely operating ships taken on time charter, even if it does not own or manage those ships. Ownership, management and operation are separate qualifying activities.

17. Purchase and sale of ships is not, by itself, the Qualifying Activity of ownership/management/operation — it may be ancillary only where the main qualifying shipping activity is also conducted.

What This Means: A business that only trades ships — buying and selling vessels without a real shipping operation behind it — cannot claim the shipping Qualifying Activity category.

Reinsurance

18. Reinsurance requires the Free Zone Person to assume all or part of the insurance risk undertaken by another insurer or reinsurer.

What This Means: Arrangements without genuine risk transfer do not qualify as reinsurance services.

Wealth and Investment Management Services

19. Commission/referral fees from genuine holistic advisory qualify as wealth-management income; pure execution/brokering doesn’t qualify alone but can be ancillary if genuine wealth management is also carried on.

What This Means: The fee payer need not be the client — what matters is whether the service is strategic management or mere execution.

Headquarter Services to Related Parties

20. Headquarter services include oversight/management of Related Parties — senior management, procurement, planning, risk management, coordination, admin support. One category may suffice, but the company must assume responsibility for the group’s overall success/governance; routine IT or marketing for one entity is generally insufficient.

What This Means: The FTA is looking for real ownership of group performance and governance behind it. A company merely providing routine IT support or marketing to one group entity, without broader strategic responsibility, risks falling outside this Qualifying Activity altogether.

21. Headquarter services may be supplied to only one Related Party where they are nevertheless provided for the wider benefit of the group.

What This Means: The number of recipients isn’t decisive — purpose, scope and group-wide impact matter more than multi-entity invoicing.

22. A Free Zone branch may provide headquarter services to its head office — although the same legal entity, branch and head office are treated as Related Parties for this purpose.

What This Means: A branch providing real HQ functions to its own head office can generate Qualifying Income of headquarter services.

Treasury and Financing Services

23. Loans, payment processing and loan guarantees for Related Parties fall within treasury and financing services, aligning with liquidity, financing, debt, risk and centralised payment functions.

What This Means: Broader than interest-bearing lending — covers central payment and guarantee arrangements, subject to substance and TP requirements.

Distribution in or From a Designated Zone

24. Distribution can qualify where the customer incorporates goods into products later sold to third parties, regardless of processing degree. If the customer retains the product/machine to provide services, it is the end-user and the sale doesn’t qualify.

What This Means: The decisive point is downstream resale versus retained use, not whether goods are transformed.

25. Where raw materials go to a foreign Related Party for manufacture and finished goods are sold outside the UAE without entering the UAE, this is foreign manufacturing, not Designated Zone distribution.

What This Means: Buying raw materials and outsourcing their manufacture abroad is treated as foreign manufacturing, not distribution. Therefore, the income will not qualify merely because the buying and selling are done by a Designated Zone company.

Logistics Services

26. A taxpayer needn’t perform every listed logistics function — it may qualify without directly storing/transporting goods if it performs other qualifying logistics activities.

What This Means: Logistics can cover coordinators, freight forwarders and agency models, not only asset-heavy operators.

27. Using third-party transport/storage providers doesn’t prevent qualification, provided the outsourced activities aren’t the taxpayer’s own core income-generating activities.

What This Means: Outsourcing is fine as long as the taxpayer still performs its CIGA in Free Zone.

Taxable Income

28. Transfer, sale or liquidation of a nominal 1% shareholding is a taxable event, but arm’s-length value may be nominal/book value where the holder has no dividend, liquidation, control or other economic benefit.

What This Means: Legal ownership alone does not necessarily create taxable income. The actual economic rights and benefits attached to the shares must be considered; i.e., substance takes priority over form.

Participation Exemption

29. The FTA treats the Participation Exemption subject-to-tax condition as satisfied for dividends from a Saudi company subject to Zakat, based on Saudi’s corporate-tax framework and 20% rate.

What This Means: Welcome clarity for Saudi investments — but ownership, holding period and asset tests still apply.

30. Dividends from a foreign holding company taxed below 9% may still qualify for participation exemption where its principal activity is holding qualifying interests and prescribed conditions are met.

What This Means: This is a conditional look-through, not a blanket pass — the holding company’s activity, substance, management and income mix all need to be tested and documented before relying on it.

31. For the 5% ownership threshold, interests held by members of a Qualifying Group must be aggregated — aggregation is compulsory.

What This Means: Taxpayers can’t choose stand-alone testing where group aggregation changes the result.

32. Dividends paid from retained earnings generated before the taxpayer acquired the Participation may still qualify, provided all other exemption conditions are met.

What This Means: No need to trace dividends only to post-acquisition profits — removes a common conservative restriction.

33. Beneficial ownership can support a Participating Interest without strict legal title, where the taxpayer controls the interest, has rights to its economic benefits, and it’s treated as equity under applicable accounting standards.

What This Means: The FTA will look through to who genuinely controls the interest and receives its economic benefits.

Registration for Corporate Tax

34. A natural-person Business ceases on the owner’s death and must deregister. If heirs continue the activity as an Unincorporated Partnership, they must appoint an authorised partner and register the partnership.

What This Means: Heirs continuing the business need to actively register a new taxpayer (typically an Unincorporated Partnership) and appoint an authorised partner.

Transitional Relief

35. Transitional relief is capped at the accounting profit attributable to the same property in the relevant Tax Period and cannot create or increase a Tax Loss.

What This Means: Transitional relief can only reduce the profit recognised on that property. It cannot turn the result into a loss or increase an existing loss.

Tax Group

36. A newly incorporated subsidiary may join an existing Tax Group from incorporation, even though its own Tax Period starts later, provided all group conditions are met from incorporation and its financial year aligns with other members.

What This Means: A short first period doesn’t prevent immediate grouping — year-end alignment and day one ownership are what counts.

Recent Insights

UAE VAT Amendments as Per Cabinet Decision No. 149 of 2026

UAE VAT Return Gets a New Best Friend: How E-Invoicing is Changing Tax Compliance

UAE VAT: New Supplier and Supply Verification Requirements

Technovisors — Fri, 17 Jul 2026 09:02:25 +0000

July 17, 2026

Additional Procedures for Distribution of Goods or Materials in or from a Designated Zone

The UAE Federal Tax Authority has issued FTA Decision No. 6 of 2026, prescribing additional procedures that Qualifying Free Zone Persons (QFZPs) engaged in the distribution of goods or materials in or from a Designated Zone must follow when supplying goods to customers outside a Free Zone.

The Decision requires affected businesses to maintain prescribed supporting documentation and obtain an agreed-upon procedures (AUP) report from an independent external auditor. This Decision Applies to Tax Periods commencing on or after 1 January 2026. Businesses should therefore review their transaction flows, customer classifications, import routes, and supporting documentation throughout the Tax Period, rather than waiting until the Corporate Tax (“CT”) return is due. The key provisions of the Decision are summarised below.

Additional Procedures for Distribution Activities in a Designated Zone

A QFZP doing distribution activity must get an AUP report either from the independent external auditor who does its annual financial statement audit, or from any other independent auditor licensed in the UAE.

Standard to follow: The AUP report must be prepared under ISRS 4400 (the international standard on related services, AUP engagements issued by IAASB), and any applicable UAE auditing rules.
The AUP report shall document the procedures performed and the related findings that shall demonstrate:
- That the QFZP sells goods or materials to customers who resell them or resell parts of such goods/materials, or processor alter them for sale or resale, and
- That any goods or materials the QFZP imports into the UAE are imported through a Designated Zone.
Supporting documents that demonstrates that the customers qualify as resellers:
The QFZP needs to maintain the following:
- Valid trade/business/commercial licences (or equivalent) showing the customer is a reseller,
- Signed declarations from customers confirming they’re buying for resale or donation to a public benefit entity,
- Sales agreements, invoices, purchase orders, or other records showing resale activity.
Supporting documentation evidencing the import of goods or materials through a Designated Zone
- Import declarations and customs clearance paperwork showing lawful entry through a Designated Zone,
- Shipping docs (bill of lading, airway bill, etc.) indicating entry through a Designated Zone.
What the report must contain: In accordance with ISRS 4400, the AUP report should document the procedures performed by the independent external auditor and the factual findings resulting from those procedures.
Deadline: The AUP report must be submitted to the FTA within 30 days of the CT return filing deadline for that Tax Period or such other date the FTA determines.
Consequence of failure: If the QFZP doesn’t submit the report on time, then it’s treated as not having met the conditions in Clause 3 Article 2 of Ministerial Decision 84 of 2025 (Audited Financial Statements) and paragraph (l), Clause 1, Article 2 of Ministerial Decision 229 of 2025 (Qualifying Activities and Excluded Activities), shall not be considered to be met.

The Procedures for Verifying Reseller Status and Designated Zone Importation

Verification of Trade License, Customer Declarations and Sales Agreements

Trade licence inspection: Obtain and inspect a sample of customer trade/business licences and check whether the listed activities (trading, wholesaling, retailing, distributing, manufacturing, etc.) support that they’re reselling the goods. A report has to be prepared confirming whether the required declarations are available and whether they confirm that the customer is a reseller of the goods or materials, in whole or in part.
Customer declarations: Obtain a sample of signed customer declarations, check if such declarations actually affirm their status as resellers, and confirm that the declarations are signed, dated, and relate to the relevant Tax Period. The report should confirm whether the supporting documentation for each sample demonstrates that the goods were imported through a Designated Zone.
Sales agreements/records: Select a sample of sales agreements, invoices, or related transaction records issued by QFZP, and look for features that indicate resale activity (bulk quantities, resale conditions, pricing structures). The finding must state whether the customer either resells the goods, or processes or alters them for sale or resale.

Inspection of Import Documentation

Import documentation: Inspect sample customs declarations, import permits, sales contracts, and bills of lading to confirm goods entered through a Designated Zone. The AUP should include whether the documentation for each sample confirms that importation occurred through a Designated Zone.
Confirmation of Designated Zone status: For the sampled imports, confirm the actual Free Zone/port/area is officially recognized as a “Designated Zone” under applicable Cabinet Decisions or any other legislations. This should be confirmed by the relevant Free Zone Authority.
Internal records: Check inventory logs, warehousing reports, goods movement records, and logistics documentation to confirm goods were received/handled/stored in a Designated Zone before distribution. Findings should include report on the internal records evidencing importation through a Designated Zone.

Other Considerations:

For any documents not covered above, the QFZP and auditor can agree on a sampling approach together, based on the same principles in Article 3.
Every procedure in the report needs to be accompanied by a description of the evidence obtained, timing, and extent of work, and the factual findings, and sample details should be included in appendix.
If the wording of a procedure is changed without changing its substance requirements, that change should be included in an appendix.

Key Takeaway

The Decision places greater responsibility on taxpayers to demonstrate that they satisfy the conditions for the 0% CT rate. This now extends beyond maintaining records and includes obtaining an AUP report from an independent external auditor.
While the objective is to strengthen compliance, businesses should be prepared for the additional time, cost, and administrative effort involved in gathering documentation and coordinating with external auditors.
Customer declarations alone will no longer be sufficient. Businesses will need to maintain a comprehensive audit trail, including trade licences, sales agreements, import documentation, customs records, and internal logistics records to substantiate their eligibility for meeting end user declaration condition for distribution activity
The UAE CT regime is built on the principle of self-assessment, under which taxpayers determine and report their tax position, while the FTA retains the power to review and audit those positions where necessary. The new requirements suggest a greater reliance on independent auditor findings as part of the compliance process.
QFZP engaged in distribution activities will face increased compliance challenges due to the additional requirements. These include maintaining adequate substance, obtaining and validating end-user declarations, substantiating that income is derived from resellers, and obtaining an AUP report from an external auditor to support compliance and transfer pricing requirements. Only upon fulfilment of all prescribed conditions, such Free Zone Persons will be eligible to be treated as QFZPs.

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