Tax Compliances in UAE: Latest Updates

Tax compliance in the UAE has become an important part of running a business. Over the years, the country has introduced structured tax systems such as VAT, Corporate Tax, and Excise Tax. Even though the UAE is still known as a business-friendly destination, companies are now expected to follow clear tax rules and meet regular reporting requirements.

Staying compliant helps businesses avoid penalties, reduce risks, and keep their operations running without interruptions. Simple mistakes like late filings, incorrect returns, or missing updates can create unnecessary problems. Understanding how UAE taxes work and what’s currently required can save both time and money in the long run.

UAE tax regulations are updated from time to time, with new rules, clarifications, and compliance deadlines announced by the Federal Tax Authority (FTA). These changes can affect how you file returns, keep records, or calculate taxes.

What are the Different Kinds of Taxes Applicable in the UAE?

Over the past few years, the UAE has introduced new tax laws to align with global standards while maintaining its position as an attractive place to do business. Knowing which taxes apply to you is the first step toward staying compliant.

1. Corporate Tax (CT)

Corporate Tax is a direct tax on business profits. While the 9% rate is low by global standards, the rules around who pays what are becoming more detailed.

The 9% Threshold:

You only pay the 9% rate on profits above AED 375,000. If your profit is below this, your rate is 0%, but you still must register and file a return.

Small Business Relief (SBR):

If your annual revenue (total sales, not just profit) is AED 3 million or less, you can elect to be treated as having zero taxable income until the end of 2026. This means no tax and much simpler paperwork.

Free Zone Rules:

Companies in Free Zones can keep their 0% tax status on “Qualifying Income.” However, they must now maintain “Substance” (having a real office and employees in the zone) and have their accounts audited by a certified firm.

2. Value Added Tax (VAT)

VAT is a consumption tax charged on most goods and services in the UAE. Businesses that cross the mandatory registration threshold must register for VAT, charge it on taxable supplies, and file regular VAT returns with the Federal Tax Authority. Some supplies are zero-rated or exempt, depending on the nature of the activity.

The Mandatory Limit:

You must register for VAT if your taxable sales/imports hit AED 375,000 over the last 12 months.

3. Excise Tax

Excise Tax is applied to specific goods that are considered harmful to health or the environment, such as tobacco products, energy drinks, and sugary beverages. Businesses involved in manufacturing, importing, or storing excise goods must comply with strict registration, reporting, and payment requirements.

Sugar-Based Tiers: Instead of a flat 50% tax on all sweet drinks, the tax is now based on grams of sugar per 100ml:

• High Sugar (8g+): AED 1.10 per litre.
• Medium Sugar (5g–8g): AED 0.80 per litre.
• Low/Zero Sugar: 0% tax (though artificial sweeteners must still be registered).

The 100% Club: Tobacco products, electronic smoking devices, and energy drinks remain taxed at a flat 100% of their retail price.

4. Withholding Taxes (WHT)

Withholding tax is a tax collected by the payer (like a business) on behalf of the recipient (like a foreign supplier). Currently, the UAE has set the WHT rate at 0%. This is a major advantage for companies that hire foreign consultants or pay royalties abroad, as it keeps cash flow moving freely.

For very large multinational groups (earning over €750 million globally), a new Domestic Minimum Top-up Tax ensures they pay at least a 15% effective tax rate in the UAE, aligning with global efforts to prevent tax avoidance.

5. Other Relevant Levies

While not always called taxes, these fees are part of your ‘cost of doing business’ in the UAE:

• Customs Duties: Most goods imported from outside the GCC face a 5% duty. Note that many Free Zone companies are exempt from this unless they sell their goods into the local UAE market.
• Property Transfer Fees: In Dubai, for example, there is a 4% fee on the sale value of property. This is usually split 50/50 between the buyer and seller, though contracts can vary.
• Digital Transformation Fees: The FTA has cancelled fees for paper certificates. Tax Registration Certificates are now issued as free digital copies with QR codes for instant verification.

Recent Corporate Tax Updates in the UAE (As of 2026)

The UAE’s corporate tax system has been rapidly evolving since its introduction in 2023.

The First Major Filing Deadlines are Here:

For many businesses, 2026 is the year the first tax return is actually due. The deadline is strictly nine months after the end of your financial year.

• January–December Financial Year: If your first tax period ended on December 31, 2025, your filing and payment deadline is September 30, 2026.
• April–March Financial Year: If your period ends March 31, 2026, your deadline is December 31, 2026.

Note: Even if your profit is zero or you qualify for relief, you must still file a return.

Small Business Relief (SBR):

The Small Business Relief remains the most vital tool for startups, but it has a built-in expiration date. Resident businesses with revenue of AED 3 million or less can elect to be treated as having “zero taxable income.” This relief is currently set to apply only for tax periods ending on or before December 31, 2026.

If you choose SBR, you cannot carry forward any tax losses or net interest expenses to future years. Businesses expecting high growth in 2027 should weigh whether it’s better to pay a little tax now to save their losses for later.

Latest VAT Compliance Changes in the UAE (As of 2026)

The UAE has introduced a set of important updates to its Value Added Tax (VAT) rules to make compliance clearer, strengthen enforcement, and align the system with international standards.

Five-Year Deadline for VAT Credits & Refunds:

A major compliance update is the introduction of a five-year limitation period to claim or use excess VAT credits and refunds. After this period, any unused VAT credit will expire permanently if not claimed or offset.

This means that VAT refunds must be claimed within 5 years from the end of the relevant tax period. Legacy VAT credits that will expire soon may need immediate action.

Launch of the E-Invoicing System (EIS):

The UAE is moving away from PDFs and paper. Starting in July 2026, the government will begin testing a national e-invoicing system. Invoices will be sent to the FTA in real-time as they are issued, making manual errors much riskier. If an invoice is not issued through the approved system once it becomes mandatory for your tier, it may be considered invalid, and the buyer will be denied the right to recover input VAT.

No More Self-Invoicing for Reverse Charge:

Under the updated rules, businesses applying the reverse charge mechanism no longer need to issue internal self-invoices for these transactions. This reduces a significant administrative step, especially for importers and companies receiving cross-border services.

Stronger Anti-Evasion Controls:

To protect the tax base, the FTA now has clearer powers to deny input tax deductions that are linked to fraudulent or artificial transactions. This aligns with global efforts to tighten anti-avoidance measures and promotes honest reporting.

Updates on Excise Tax in the UAE (As of 2026)

Excise Tax in the UAE continues to evolve in 2026, with key changes aimed at improving public health outcomes, tightening compliance, and making the tax system more transparent and predictable for businesses.

Introduction of a Tiered Sugar-Based Excise Tax:

As of January 1, 2026, the old 50% flat tax on all sweetened drinks has been replaced. The tax is now volumetric, meaning it is charged as a fixed amount of Dirhams per litre, depending on how many grams of sugar are in the drink.

Artificial sweeteners (like Stevia or Aspartame) do not count as sugar in this calculation. If a drink uses only artificial sweeteners and has 0g of real sugar, it qualifies for the 0% tax rate.

Category Shift for Carbonated Drinks:

In a big change for 2026, Carbonated Drinks are no longer a separate excise category. Previously, all sodas were taxed at 50% just for being bubbly. But now, they are simply treated as Sweetened Drinks. If a brand reformulates a soda to have less than 5g of sugar, it can now be sold excise-free, even if it is still carbonated.

Mandatory Lab Certification:

You can no longer just claim your drink is low sugar. To benefit from the lower tax tiers, businesses must:

• Obtain a Lab Report: All products must be tested by a MOIAT-accredited laboratory (such as Dubai Central Lab or SGS).
• Register the Certificate: This report must be uploaded to the FTA’s EmaraTax portal.

Transitional Relief and Excise Tax Deductions:

The UAE’s tax authorities have also introduced specific provisions under FTA Decision No. 11 of 2025 that allow businesses to claim limited deductions where excise tax was previously paid under the old rules, but the new tiered model results in a lower tax amount – provided certain conditions are met (e.g., products remain unsold and proper documentation is supplied).

Tips for Smooth Tax Compliance in the UAE

Here are some expert-backed tips to help you stay on track.

1. Don’t Treat Compliance as a One-Time Task: Tax and regulatory compliance is ongoing, not something you handle only at year-end. Track deadlines throughout the year for VAT, Corporate Tax, and UBO. Review compliance requirements whenever there’s a business change (new activity, revenue growth, expansion).
2. Maintain Accurate and Updated Records: Clean and well-organised records form the backbone of tax compliance. Keeping proper invoices, contracts, bank statements, and accounting records makes filings smoother and protects businesses during audits or reviews.
3. Use the Right Accounting and Compliance Tools: Reliable accounting software helps businesses track transactions accurately, prepare tax returns efficiently, and meet deadlines with confidence. With digital initiatives such as e-invoicing gradually rolling out, preparing systems early can save time and prevent disruptions later.
4. Conduct Periodic Internal Reviews: Regular internal reviews help identify gaps or errors before they become serious issues. Reviewing tax returns, compliance filings, and supporting documents from time to time allows businesses to correct mistakes proactively and stay aligned with regulatory expectations.

Bonus Tip: Get Professional Support to Stay Fully Compliant

Even with the best internal processes, tax compliance in the UAE can become complex, especially with regular updates to Corporate Tax, VAT, Excise Tax, UBO, and reporting requirements. This is where professional support can make a real difference. Shuraa Tax supports businesses with end-to-end taxation services in the UAE. From Corporate Tax and VAT registration to return filing, compliance reviews, advisory, and audit support, the team helps businesses stay aligned with UAE tax laws at every stage.

With expert guidance, businesses can avoid costly mistakes, stay updated with regulatory changes, and focus more on growth instead of compliance stress.