The UAE Ministry of Finance has introduced the first dedicated research and development tax incentive under the UAE Corporate Tax framework. Here is what businesses need to understand before the 2026 tax year gets underway.

Following a public consultation process conducted in April 2024 and a formal policy announcement in December 2024, the UAE Ministry of Finance published Cabinet Decision No. 215 of 2025 (“CD 215”) and Ministerial Decision No. 24 of 2026 (“MD 24”) on 18 March 2026. Together, these instruments establish a Research and Development (“R&D”) Tax Credit regime under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”). The regime takes effect for tax periods and fiscal years commencing on or after 1 January 2026.
CD 215 sets out the legislative architecture of the incentive, the definition of a qualifying entity, the conditions for claiming the credit, the categories of qualifying expenditure, and the framework for utilising, carrying forward, and transferring a tax credit balance. MD 24 then supplies the operational mechanics, prescribing applicable credit rates, staffing thresholds, activity criteria, record-keeping requirements, and anti-abuse provisions.

Background:  

Following a public consultation process conducted in April 2024 and a formal policy announcement in December 2024, the UAE Ministry of Finance published Cabinet Decision No. 215 of 2025 (“CD 215”) and Ministerial Decision No. 24 of 2026 (“MD 24”) on 18 March 2026. Together, these instruments establish a Research and Development (“R&D”) Tax Credit regime under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”). The regime takes effect for tax periods and fiscal years commencing on or after 1 January 2026.
CD 215 sets out the legislative architecture of the incentive, the definition of a qualifying entity, the conditions for claiming the credit, the categories of qualifying expenditure, and the framework for utilising, carrying forward, and transferring a tax credit balance. MD 24 then supplies the operational mechanics, prescribing applicable credit rates, staffing thresholds, activity criteria, record-keeping requirements, and anti-abuse provisions.

The credit in brief:

The UAE R&D Tax Credit is a non-refundable, expenditure-based incentive. Eligible businesses generate a “tax credit balance” from qualifying R&D expenditure incurred in the UAE. That balance is applied against Corporate Tax and, where applicable, Top-up Tax (DMTT) liabilities. In its current Phase 1 form, the credit is worth up to 50% of qualifying expenditure, with qualifying expenditure capped at AED 5 million per entity or per Tax Group, yielding a maximum credit of AED 2 million per year. The Ministry has indicated that Phase 2 may consider refundability and a wider scope of qualifying expenditure.

Who Qualifies?

The regime applies to UAE-resident juridical persons, foreign entities with a UAE permanent establishment, and Free Zone persons, provided they are subject to the standard 9% Corporate Tax rate or to Top-up Tax. Two categories of taxpayer are expressly excluded: entities that have elected for Small Business Relief under Article 21 of the Corporate Tax Law, and any entity specified by a ministerial decision.

A minimum qualifying expenditure of AED 500,000 (excluding the 30% uplift on staff cost) per R&D project per tax period applies. Projects falling below this threshold do not give rise to a tax credit, regardless of how well they otherwise satisfy the eligibility criteria.

Free Zone persons operating under Qualifying Free Zone Person (“QFZP”) status should take particular care. The credit is generally available only in respect of income subject to the 9% Corporate Tax rate. This requires a careful analysis of whether the R&D activity in question falls within or outside the qualifying activity perimeter, and of how the QFZP’s income is attributed across its non-qualifying and qualifying segments.

Qualifying R&D activities

Qualifying activities must align with the internationally recognised principles of the OECD Frascati Manual. Concretely, activities must be: novel; creative; systematic; conducted under conditions of genuine uncertainty; and capable of producing results that are transferable or reproducible. Only the UAE-based portion of any cross-border activity qualifies. Activities in the fields of social sciences, humanities, and the arts are expressly excluded.

The Frascati alignment requirement is not merely formal: it will require businesses to document the scientific or technological basis of their work, the nature of the uncertainty being resolved, and the systematic process applied. Businesses that incur R&D expenditure without maintaining this documentation are unlikely to meet the evidentiary standard required by the Federal Tax Authority (“FTA”) on review.

Credit rates and staffing thresholds

The regime operates on a dual-threshold model. Credit rates depend on both the level of qualifying expenditure and the average number of R&D employees engaged during the tax period. Both thresholds must be satisfied simultaneously at each tier. Where the staffing threshold at a given tier is not met, the credit rate defaults to the highest tier for which both conditions are satisfied.

The practical consequence of the dual-threshold structure is significant. A business spending AED 2 million on qualifying R&D but employing an average of only four R&D staff during the period would be capped at the 15% rate on the first AED 1 million, with no credit available on the remaining AED 1 million. Workforce planning is therefore a direct lever on the credit value that can be realised.

Qualifying expenditure

Four categories of expenditure qualify, each subject to specific conditions.

Staff costs — with 30% overhead uplift. Staff costs are the primary value driver of the regime. Qualifying costs include salaries, wages, benefits, allowances, medical insurance, gratuity, bonuses, and R&D training costs for employees directly engaged in qualifying activities. A mandatory 30% overhead uplift is applied to qualifying staff costs, replacing the need for a detailed allocation of overhead expenses. Externally provided workers supervised by the taxpayer within the UAE also qualify. Employee stock option plans and intra-group tax recharges are excluded.

Within a recognised Tax Group under the Corporate Tax Law, qualifying expenditure is aggregated at the group level and the credit is recognised by the parent company. For domestic groups filing separate returns under common ownership of at least 75%, credits may be transferred to another UAE taxable person in the same tax period, though transferred credits cannot be carried forward or further transferred by the recipient. On a qualifying business reorganisation involving the transfer of an entire business or an independent part thereof, the transferee may carry forward and utilise credits as if it were the original entity, provided the business and R&D activities continue for at least two years following the transfer.

Interaction with Pillar Two

For multinational enterprise groups subject to the UAE’s Domestic Minimum Top-up Tax (“DMTT”), CD 215 expressly provides that the R&D Tax Credit may be deducted from the DMTT liability. As the credit is non-refundable in its current Phase 1 form, it cannot generate a cash repayment; its value is limited to the extent of the entity’s Corporate Tax and DMTT liabilities in the period, with any excess carried forward. The GloBE treatment of a non-refundable credit used to reduce a covered tax liability — and the consequent effect on the Effective Tax Rate computation — should be assessed carefully by groups within the scope of DMTT before claims are filed.

Practical Observation

The R&D Tax Credit represents a meaningful addition to the UAE’s Corporate Tax incentive landscape. The regime is, however, structurally demanding. The pre-approval requirement, dual expenditure and headcount thresholds, documentation obligations, and Free Zone eligibility restrictions mean that incurring R&D costs is not, of itself, sufficient to access the credit.

Businesses with a genuine R&D footprint in the UAE, particularly in technology, life sciences, advanced manufacturing, financial services innovation, and the energy transition, should assess, as a priority, whether their activities and operating models satisfy the Frascati criteria, and whether their staffing levels are structured to reach the relevant credit tiers. Early engagement with the Emirates R&D Council, before expenditure is committed, is essential.

Consideration should also be given to how group structures interact with the transfer and carry-forward rules, and to the impact of the credit on any Pillar Two position. For groups where the credit could affect the GloBE ETR computation, the timing and quantum of credit claims may warrant careful sequencing.

How Aurifer can help

Aurifer advises businesses across the UAE and GCC on Corporate Tax strategy, incentive regime eligibility, Free Zone tax structuring, and Pillar Two compliance. We are able to assist with assessing whether activities and operating models qualify for the R&D Tax Credit under CD 215 and MD 24; managing the pre-approval process with the Emirates Research and Development Council; quantifying qualifying expenditure and modelling credit value across tax periods; advising on group transfer and carry-forward mechanics; and evaluating the interaction of the credit with any GloBE Top-up Tax position.

For further information, please contact Thomas Vanhee, Managing Director, at Thomas@aurifer.tax.

Article 36(1) of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (“Corporate Tax Law”) provides that any payment or benefit made by a Taxable Person to a Connected Person is deductible only to the extent that it reflects the market value of the corresponding service or benefit, and is wholly and exclusively for the purpose of the Taxable Person’s Business.

Under Article 36(2)(b), the definition of a Connected Person includes a director or officer of the Taxable Person. In addition, pursuant to Article 55(1) and the Federal Tax Authority’s published guidance on Corporate Tax Returns, Taxable Persons are required to disclose transactions and arrangements with Connected Persons in their Tax Return where such transactions exceed the prescribed threshold of AED 500,000. Accordingly, payments or benefits provided to Connected Person directors and officers need to be made at market value and appropriately disclosed.

In this context, the Public Clarification issued by the Federal Tax Authority on 29 April 2026 provides guidance on the interpretation of the terms “director” and “officer” for the purposes of Articles 36(2)(b) and 55(1) of the Corporate Tax Law. The clarification only addresses Connected Persons definitions, it does not provide broader clarification on those under Article 36(6) of the Corporate Tax Law that may be exempted from Article 36(1).

Definitions

Director:  

• Any individual formally appointed to the board of directors of a Taxable Person, including executive, non-executive, temporary, permanent, or alternate directors, as well as members of board committees.
• In the absence of a board of directors, any individual holding a position on an equivalent governing body (e.g., board of trustees or board of governors), as determined under the applicable laws governing the entity or its constitutional documents (including the memorandum of association, articles of association, partnership deed, or trust deed).
• Individuals whose job title includes the term “director”, but who do not hold a position on the board of directors, or an equivalent governing body are not considered “directors” for the purposes of Article 36(2)(b).

Officer:

• Has the authority and responsibility for planning, directing, and controlling the activities of a Taxable Person, consistent with International Accounting Standard 24 on Related Party Disclosures.
• Has the authority to make strategic decisions relating to the financial, operational, or commercial affairs of a Taxable Person.
• Has the authority to enter into agreements or approve actions that legally or contractually bind the Taxable Person.
• Does not include individuals who lack final or ultimate strategic decision-making or binding authority.
• May include individuals without a formal title where their actual conduct demonstrates the requisite authority and responsibility.
• Concept of payments to Connected Persons officers applies to all Taxable Persons, including trusts, foundations, and unincorporated partnerships treated as fiscally opaque for Corporate Tax purposes. However, only a natural person can be an officer.
• Where a Person qualifies as both a Related Party and a Connected Person, such Person shall be treated solely as a Related Party for the purposes of the Corporate Tax Law.

Our Comments

The clarification provides welcome guidance on the interpretation of “director” and “officer” under the Corporate Tax Law. However, its practical application is likely to require careful judgement, particularly in organizations with complex governance structures or decentralized decision-making frameworks. While the definition of “director” is grounded in formal legal appointment, the concept of “officer” adopts a substance-over-form approach, focusing on actual authority and decision-making.

For businesses that have already filed a Connected Persons disclosure, the distinction may broaden the scope of individuals such businesses consider to be captured within the Connected Persons framework, particularly in cases involving senior management, dual-hatted roles, or individuals exercising significant influence without formal designation. As a result, businesses may need to review their governance structures, delegation of authority frameworks, and contractual arrangements to ensure that all relevant individuals are appropriately identified. There are also direct implications for the deductibility of payments under Article 36 and the disclosure requirements under Article 55, requiring robust support for the arm’s length nature of such transactions.

How We Can Help

We can support businesses in navigating these requirements through a combination of technical analysis and practical implementation.

This includes reviewing governance structures and organizational roles to identify Connected Persons directors and officers in line with the clarification. In addition, we can assist in the preparation of benchmarking analysis and other supporting documentation for compliance with the market value requirement. Finally, we can assist in the preparation or review of the Connected Persons disclosures in the Tax Return.

Our TP Specialists

Saudi Arabia has officially activated the regulatory frameworks for its Special Economic Zones (SEZs), marking a significant milestone in the Kingdom’s Vision 2030 economic diversification strategy. Published in the Official Gazette on January 16, 2026, these implementing regulations provide a clear legal structure and a comprehensive package of tax and customs incentives for four designated zones, which will take full effect in April 2026 . This article delves into the specifics of these new regulations, offering a detailed look at the tax implications and incentives for businesses considering establishment in Saudi Arabia’s new economic zones.

An Overview of Saudi Arabia’s Special Economic Zones

The new regulatory framework applies to four distinct SEZs, each strategically designed to foster growth in specific sectors .

• King Abdullah Economic City (KAEC) SEZ: Focused on advanced manufacturing, automotive, consumer goods, ICT, pharmaceuticals, MedTech, and logistics .
• Jazan Special Economic Zone: A gateway for trade with African markets, concentrating on food processing, metals conversion, and logistics .
• Ras Al-Khair Special Economic Zone: Dedicated to becoming a global hub for maritime industries, including shipbuilding, rig platforms, and maintenance, repair, and overhaul (MRO) services .
• Cloud Computing Special Economic Zone: A unique “virtual” zone based in Riyadh, designed to attract local and international investors in cloud computing and data services .

These zones are governed by the Economic Cities and Special Zones Authority (ECZA), which holds sole authority to issue licenses and permits . To operate within an SEZ, entities must be incorporated as a Saudi limited liability company (LLC) with their principal place of business located within the zone . A key feature is that companies licensed in these SEZs are exempt from certain provisions of the standard Companies Law, offering greater organizational flexibility .

Decoding the Corporate Income Tax Incentives: The Critical Distinction Between Promotional Materials and Implementing Regulations

For investors, the most compelling aspect of Saudi Arabia’s SEZs is undoubtedly the promise of a drastically reduced tax burden. ECZA has prominently marketed a 5% Corporate Income Tax (CIT) rate for up to 20 years for the industrial zones. However, a deep dive into the implementing regulations published in the Official Gazette on 16 January 2026, under Ministerial Resolution No. 468, reveals a more nuanced legal reality . This distinction is not about a bait-and-switch, but rather the difference between a high-level policy promise and the detailed legal framework that will bring it to life.

The Foundation: Exemption from Zakat and Subjection to CIT

Before examining the rates, it is essential to understand the foundational tax treatment for all four SEZs. Licensed entities in all SEZs are excluded from the scope of the Zakat Regulations . This is a significant departure from the mainland, where the tax treatment often depends on ownership. In the SEZs, all companies, regardless of whether they are owned by Saudi, GCC, or foreign nationals, are subject to the unified Saudi Corporate Income Tax (CIT) . This exemption is, however, conditional. It is not automatic and requires that the entity holds a valid SEZ license and operates strictly within the scope of its licensed activities. Any deviation from the licensed activity profile may place the entire Zakat exemption—and potentially other benefits—at risk .

Model One: The 5% CIT Rate for KAEC, Jazan, and Ras Al-Khair – A Matter of Implementation

For the three location-based, industrial zones—King Abdullah Economic City (KAEC), Jazan, and Ras Al-Khair—the official ECZA communications and investment brochures clearly advertise a headline incentive: a “5% Corporate Income Tax for up to 20 years, subject to renewal” . This represents a dramatic reduction from the standard 20% CIT rate in the mainland economy and is a foundational pillar of their value proposition for capital-intensive projects.

However, a careful reading of the January 2026 implementing regulations shows that this specific 5% figure is not explicitly stated in the primary legal text of the regulations themselves . The regulations, instead, establish the legal authority for these incentives. They confirm that licensed companies in these zones are subject to income tax, taking into account any applicable exemptions and incentives, and empower the Zakat, Tax and Customs Authority (ZATCA), in coordination with ECZA, to develop comprehensive procedural guides that will detail the tax and customs processes .

For investors, this means the 5% rate is not a typo or a myth, but a reliably expected outcome that will be formally enacted through subsequent administrative guidance. The implementing regulations create the legal container, and the forthcoming ZATCA procedural guides are expected to pour the specific 5% rate into it . The key takeaway is that the legal basis is solid, but the precise mechanics for claiming the rate will be detailed in future guidance.

Model Two: The OECD-Aligned “Special Tax Treatment” for the Cloud Computing SEZ

The Cloud Computing SEZ operates under a fundamentally different tax philosophy, reflecting the unique business models of global Cloud Service Providers (CSPs). The ECZA brochure describes its incentive not as a fixed rate, but as a “Special tax treatment in line with OECD principle that avoids double taxation and accommodates CSPs operating model” .

This linguistic shift is crucial. The implementing regulations for the Cloud SEZ are markedly narrower. They confirm the standard SEZ provisions: licensed entities are subject to CIT and are exempt from Zakat . Crucially, they do not grant the same Withholding Tax (WHT) exemptions, VAT zero-rating on goods, or customs duty suspensions that are provided to the other three zones . As noted, the Cloud SEZ Bylaws adopt a significantly narrower tax approach, providing no special treatment for WHT, VAT, or customs duties .

So, what does its incentive actually entail?

Instead of a blanket low rate, the benefit is structural. By placing licensed entities solely under the CIT regime and aligning with OECD principles, the zone aims to create a predictable, single-tier tax framework that integrates seamlessly with the complex cross-border structures of tech giants . This represents a materially different tax and regulatory proposition designed around the operational needs of cloud providers, such as avoiding double taxation and simplifying profit repatriation in a capital-intensive, globally integrated business. While some sources outside the official regulations still mention a 5% CIT rate for this zone, the authoritative legal and expert analysis strongly points to a more bespoke, structurally-focused incentive package rather than a simple discounted rate.

So, what does its incentive actually entail?

Beyond the foundational CIT rules, the SEZs offer a range of other tax incentives that, like the CIT rate, vary between the sector-specific zones and the Cloud Computing SEZ.

Withholding Tax (WHT) Exemptions

For the Jazan, Ras Al-Khair, and KAEC SEZs, licensed companies benefit from a full exemption from withholding tax on payments related to their licensed activities . This exemption is a powerful tool for international groups, as it eliminates tax leakage on outbound payments such as dividends, interest, royalties, and technical service fees paid to non-residents . This is not an automatic exemption and is tightly scoped to payments directly connected to the licensed activities of the SEZ entity .

Value Added Tax (VAT) and Customs Duties

The VAT and customs framework in the Jazan, Ras Al-Khair, and KAEC zones is designed to facilitate the duty-free movement of goods and significantly reduce associated costs.
The table below summarizes the key incentives for these three zones:

A critical point to highlighted is that these generous VAT benefits currently apply only to goods, not services. Services provided to or by SEZ entities remain subject to the standard VAT rules, creating a potential area of complexity for businesses, especially regarding management and support services.

Value Added Tax (VAT) and Customs Duties

Operating under a slightly different framework is the Special Integrated Logistics Zone (SILZ) at King Salman International Airport in Riyadh. It offers an even more attractive, though more targeted, set of incentives for logistics activities like storage, maintenance, repair, and re-export .

• 0% Income Tax for 50 Years: A full tax holiday on income derived from licensed zone activities, a stark contrast to the 20% rate in other SEZs .
• Withholding Tax Exemption: No WHT on certain payments to non-residents during the tax holiday period .
• VAT and Customs Suspension: Similar suspension of VAT and customs duties on goods related to zone activities .

The New Compliance Frontier: Economic Substance Requirements (ESR) 

In a move that underscores the “incentive-with-discipline” model underpinning the entire SEZ program, ZATCA, in collaboration with ECZA, released the draft Economic Substance Requirements (ESR) Regulations for Special Economic Zones for public consultation. This draft regulation is pivotal. It aims to define the economic substance that investors must demonstrate to qualify for and retain the generous tax benefits—whether the fixed 5% rate in the industrial zones or the special tax treatment in the Cloud Zone.

Core Economic Substance Requirements

Article Three of the draft regulations requires every Investor (a person authorized to carry out Qualified Activities in a Zone) to meet the following requirements annually, starting from the first financial year in which they begin operations :
1. Physical Presence: The Investor must have adequate premises and assets that are suitable for conducting their Qualified Activities within the Zone .
2. Adequate Employees: The Investor must employ an adequate number of full-time employees who are physically present in the Zone during the financial year. This can include personnel seconded from companies contracting with the investor .
3. Operating Expenditure: The Investor must incur operational expenditures within the Zone that are commensurate with the nature of the Qualified Activities carried out .
4. Direction and Management in the Zone: The Investor’s Qualified Activities must be directed and managed from within the Zone. This specifically requires :
o At least one director responsible for managing the Qualified Activities to be a resident of the Kingdom.
o The management to have the necessary qualifications.
o A number of board of directors’ meetings (or equivalent) to be held in the Kingdom where actual and strategic decisions are made and recorded, with the required quorum of members present in the Kingdom.

Core Economic Substance Requirements

Recognizing the unique challenges posed by mobile intangible assets, the draft ESR regulations introduce heightened substance requirements specifically for businesses deriving income from Intellectual Property assets . These provisions are designed to prevent the artificial localization of IP in the SEZs for tax avoidance purposes and reflect the OECD’s “nexus approach” for IP regimes.

Article Three (B) of the draft outlines these additional mandatory requirements:
Genrally, IP assets are explicitly recognized as a form of “capital” under Saudi investment law, which includes “intellectual property rights” such as patents, industrial designs, trademarks, and trade secrets.

• Enhanced Director Presence: At least 50% of the directors managing the Qualified Activities must be residents of the Kingdom .
• Detailed Business Plan: The Investor must provide a detailed business plan demonstrating the commercial rationale for holding the Intellectual Property Assets in the Zone . This directly targets passive IP holding structures, requiring a clear, justifiable business purpose beyond tax optimization.
• Detailed Employee Information: The Investor must provide detailed information about their employees, including their level of experience, type of contracts, qualifications, and duration of employment .
• Strategic Decision-Making and Risk Management: Strategic decisions related to the IP assets must be made within the Zone, and the Investor must manage and bear the economic risks associated with those assets .
• Prohibition on Pure Marketing Activities: The Investor’s activity must not be limited to marketing the Intellectual Property Assets . This is designed to exclude entities that merely hold and market IP without any substantive development or management functions.

Side Note: Alignment with Saudi Arabia’s Modernized IP Framework

These IP-specific ESR provisions are being introduced in parallel with a comprehensive modernization of Saudi Arabia’s intellectual property laws. The new Copyright Law – 1447, issued under Royal Decree No. M/169 and published in February 2026, represents a fundamental shift toward stronger, internationally aligned IP protection . Key features of this new framework that intersect with the SEZ ESR include:

• Expansive Definition of Protected Works: The law protects any innovative literary, artistic, or scientific creation, explicitly including computer programs, innovative databases, and derivative works—assets that are likely to be core to SEZ licensees.
• Text and Data Mining Exception: Notably, the law expressly permits text and data mining for artificial intelligence development, positioning Saudi Arabia as forward-looking in balancing technological advancement with IP protection . This exception could be particularly relevant for Cloud SEZ licensees and R&D-focused entities in the industrial zones.
• Strengthened Enforcement: The new Copyright Law introduces significant penalties for infringement, including imprisonment for up to one year and fines of up to SAR 1 million, reinforcing that IP rights in Saudi Arabia are enforceable and protected . For SEZ entities relying on IP assets, this enhanced legal protection provides greater commercial certainty.

Reporting, and Consequences of Non-Compliance

• Annual Return: Investors must file an annual return using a form prescribed by ZATCA to verify compliance with the ESR .
• Guidance: ZATCA is authorized to issue detailed guidance or explanatory material regarding the application of these regulations .
• Penalties: In the event of a violation of any ESR, the penalties issued by the Governing Body (ECZA) shall be applied . (The specific penalty amounts are not listed in this draft but would be detailed in separate regulations or decisions).
• Effectiveness: The regulation will be published in the Official Gazette and is deemed effective from the date of its publication .

For investors, this reinforces a central principle that threads through the entire SEZ framework: access to benefits is conditional on genuine, value-adding operations within the Kingdom. A company cannot simply incorporate in an SEZ, enjoy the 5% CIT rate or special tax treatment, and conduct all its substantive operations elsewhere.

Conclusion and Strategic Outlook

The issuance of the implementing regulations for Saudi Arabia’s Special Economic Zones in January 2026, followed by the consultation on Economic Substance Requirements in February and March 2026, transforms the investment landscape from a policy-driven promise into a legally-grounded and compliance-focused reality. For investors, the message is clear: the Kingdom is offering a compelling value proposition through targeted tax and customs incentives in exchange for a commitment to a disciplined, transparent, and compliant operational framework .

The headline incentives are real, but they are embedded in a layered legal framework where rights and responsibilities are inextricably linked. The implementing regulations provide the legal certainty for the SEZ program, while the specifics—particularly the 5% CIT rate and the ESR tests—will be activated and enforced through detailed guidance from ZATCA. The strategic takeaway is that the industrial zones offer a broad-based, rate-driven incentive package, whereas the Cloud SEZ offers a narrower, structurally-driven regime tailored for the digital economy.

As further detailed guidance from ZATCA is anticipated, businesses are advised to conduct a thorough review of their corporate structures and supply chains to align with the new regulations and fully capitalize on the opportunities presented by Saudi Arabia’s ambitious economic zones.

As anticipated in the late evening of February 23, 2026, the UAE Ministry of Finance (MoF) released the official Electronic Invoicing Guidelines (hereinafter: “e-Invoicing Guidelines”) on February 24, 2026.This comprehensive reference document – 46 pages long – is designed to support businesses in efficiently preparing for the implementation of the e-invoicing system across the UAE as part of the broader “We the UAE 2031” vision.The e-Invoicing Guidelines build upon various legislation released in the last few months, such as:

• Ministerial Decision (MD) No. 243 of 2025 on the Electronic Invoicing System.
• Ministerial Decision (MD) No. 244 of 2025 on the Implementation of the Electronic Invoicing System.
• Ministerial Decision (MD) No. 64 of 2025 on the eligibility criteria and Accreditation procedure for Service Providers under the Electronic Invoicing System.
• Cabinet Decision (CB) No. 106 of 2025 on the Violations and Administrative Penalties Resulting from Violation of the Legislation Regulating the Electronic Invoicing System.

Implementation timeline and identification number The implementation timeline for e-Invoicing provides that a pilot program (by invitation only) will commence on July 1, 2026, with voluntary adoption available from the same date, followed by phased mandatory implementation as follows:

Persons within scope will be required to appoint an Accredited Service Provider (ASP) to facilitate both the issuance (accounts receivable) and receipt (accounts payable) of e-Invoices. Importantly, responsibility for compliance remains with the supplier, including obtaining the buyer’s Peppol participant identifier, in collaboration with the ASP. It is important to note that persons or Government Entities may face penalties for failing to issue or process e-Invoices. Penalties include administrative fines for breaching VAT and tax invoicing laws, as well as specific e-Invoicing penalties. The latter do not apply to voluntarily issued e-Invoices.

The ASP onboarding process must be initiated by the taxpayer via the EmaraTax portal. For identification purposes under the e-Invoicing framework, the participant identifier will comprise “0235” followed by the Tax Identification Number (TIN), corresponding to the first 10 digits of the TRN issued by the FTA. For tax groups, the representative member’s TRN will be disregarded, and each member’s TIN will be used instead. Persons within the scope of e-Invoicing but not registered for any tax in the UAE will be required to register with the FTA to obtain a TIN.

Scope and Coverage

Upon full implementation, e-Invoicing will apply to all persons conducting business in the UAE, irrespective of their VAT registration status or place of establishment, unless specifically excluded per MD No. 243 of 2025.

E-Invoicing applies to all in-scope business transactions between Persons and Government Entities, unless specifically excluded. It also applies to supplies to Government Entities. However, it does not apply to supplies involving natural persons acting outside a business capacity, including where billing agents are used. Notably, no e-Invoice is required for consumer supplies (i.e., B2C transactions). The e-Invoicing Guidelines clarify that investment holding companies fall outside the scope of e-Invoicing, since they typically earn only passive income, unless they recharge operational or other costs to third or related parties. In such cases, they must register for e-Invoicing.

The e-Invoicing Guidelines clarify that transactions between members of the same VAT group fall within the scope of e-Invoicing. However, a 24-month transitional relief applies from 2027, during which intra-group transactions between VAT group members will be exempt from e-Invoicing, after which standard e-Invoicing obligations will apply. Non-resident persons required to issue Tax Invoices under the UAE VAT Decree-Law must issue such invoices as Electronic Invoices. However, Imports of “Concerned Goods” and “Concerned Services” subject to the reverse charge mechanism under Article 48 of the VAT Decree-Law are not subject to e-Invoicing requirements.

E-invoicing categories and invoicing rules 

E-Invoicing rules differ from VAT tax invoice requirements. Taxable persons must continue to issue tax invoices and credit notes in XML format, and may need to issue separate invoices where the buyer has not yet implemented e-Invoicing. In such cases, where the buyer does not have a Participant Identifier, suppliers must include the predefined endpoint (0235:9900000098) on the Electronic Invoice.

Section 10 of the e-Invoicing Guidelines outlines six e-invoice categories, such as Electronic Tax Invoice, Electronic Tax Credit Note, Commercial Invoice, Electronic Credit Note, and their self-billed equivalents. It is important to emphasize that e-Invoicing encompasses both VAT-related invoices and commercial invoices, i.e., invoices relating to goods that are exempt or out of scope for VAT purposes, or supplies made by Persons who are not registered for VAT.

Provisional invoices, i.e., invoices issued before the final transaction details (such as quantity, price, or applicable taxes) are fully determined, must also be issued as e-Invoices, with adjustments made through credit notes or additional invoices. The e-Invoicing Guidelines also emphasize the distinction between standard billing and self-billing, noting that self-billing is permitted only under VAT rules for registered parties and is not available for commercial invoices.

Administrative exceptions granted under the VAT Executive Regulation for issuing tax invoices or tax credit notes do not apply to Electronic Invoices or Electronic Credit Notes.

Special Invoicing Scenarios

The e-Invoicing Guidelines further detail eight specific scenarios – (1) Free Zone transactions, (2) Deemed supplies, (3) Margin scheme supplies, (4) Summary invoices, (5) Continuous supplies, (6) Agent billing, (7) e-Commerce transactions, (8) Exports – each with particular data and reporting requirements. For instance, where the customer is a Free Zone entity, the Electronic Invoice must also include beneficiary details in addition to customer details.

The e-Invoicing Guidelines emphasize that when multiple scenarios apply to a supply, the specific requirements for each scenario must be included in the e-Invoice issued for that transaction. Additionally, the following mandatory tax categories are explained: standard rate, exempt, out-of-scope, reverse charge, zero-rated, and margin scheme, including clarification of domestic reverse charge obligations for specified goods.

Record retention requirements

Electronic invoices must be issued, transmitted, and received in XML format and will not include QR codes or barcodes.

Persons subject to the e-Invoicing system must store electronic invoices, credit notes, and associated
data in accordance with the retention requirements under the UAE Tax Procedures Law. The requirement is considered met where records are securely stored in an electronic system that preserves their integrity and allows prompt retrieval and reproduction by the FTA.

While the legislation refers to storage “within the State”, this requirement is intended to ensure that records remain accessible, verifiable, and reproducible by the FTA, regardless of the physical location of servers or cloud-based storage infrastructure.

“Associated data” refers only to information necessary to validate the authenticity and integrity of the electronic invoice or electronic credit note, and does not extend to broader commercial documentation.

Additional Guidance Issued

The e-Invoicing Guidelines also contain three Appendices:

• Appendix 1 covers a step-by-step guide for businesses to get ready for e-Invoicing.
• Appendix 2 provides a high-level, indicative checklist for businesses and government entities to ensure their readiness for e-Invoicing.
• Appendix 3 lists the various business and government entities involved in the process and their respective responsibilities.

Together with the e-Invoicing Guidelines, the UAE MoF released two other documents relating to:

• Considerations for selecting an ASP. This document provides a list of considerations for a Person or Government Entity to consider when deciding which ASP to onboard for UAE e-Invoicing. These considerations require scrutiny at various levels, including evaluating the Company History, Geographical Reach, Product Ownership, Integration and Data Management, Compliance and Security, Customer Support and Service Level Agreements (SLAs), Pricing Structure, Scalability, and future proofing.
• UAE Electronic Invoice Mandatory Fields. This document provides a list of mandatory fields for both an electronic Tax Invoice and a commercial Electronic Invoice (XML), including Invoice Details, Seller Details, Buyer Details, Document Totals, Tax Breakdown, and Invoice Line.

Conclusion

With the release of the e-Invoicing Guidelines, the implementation of the UAE e-Invoicing system has entered a significant operational phase. Businesses should begin assessing system readiness, evaluating ASP providers, and reviewing transaction flows and invoicing processes to ensure compliance with the upcoming requirements.

Please do not hesitate to contact us if you would like to discuss the implications of the new e-Invoicing framework or assess your organisation’s readiness for the upcoming UAE e-Invoicing.

What is the guide for Advance Pricing Agreements, and why is it significant? 

At the end of 2025, the Federal Tax Authority (“FTA”) released a first guide for the procedural aspects of United Arab Emirates (“UAE”) Advance Pricing Agreements (“APAs”). The mechanism for APAs had already been introduced in principle under Article 59 of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (“Corporate Tax Law”), which was issued back in October 2022. However, it was not until the release of the APA guide that the mechanism was formalized.

APAs can be made with respect to Controlled Transactions, being between both related parties and connected persons, that are proposed or entered into by any natural person or juridical person (“Person”).

The APA programme offers a voluntary mechanism for a Person to enter into an agreement for determining the arm’s length price of Controlled Transactions over a period of time and preventing the risk of Transfer Pricing (“TP”) disputes and litigation. Such period of time would be at least three tax periods and no more than five.

Phased introduction of APAs

A Unilateral APA (“UAPA”) is an agreement between a Person and the FTA for domestic and cross border Controlled Transactions. UAPAs for cross border Controlled Transactions will be exchanged with foreign tax administrations of the jurisdiction of the ultimate parent entity, the immediate parent entity, and the counterparty of Controlled Transactions.

UAPAs will firstly be available in respect of domestic Controlled Transactions, for which the FTA are already accepting applications. For cross border Controlled Transactions, the commencement date will be announced later this year.

UAPAs will only cover prospective periods. At an as yet unspecified point in future the APA programme will also be extended to the Bilateral APA (“BAPA”) between competent authorities of two jurisdictions and the Multilateral APA (“MAPA”) between competent authorities of more than two jurisdictions.

Eligibility for an APA

A Person who has proposed or entered into a domestic and/or cross border Controlled Transaction is eligible to enter into an APA, provided the total/expected value of all the Controlled Transactions proposed to be covered under the APA is at least AED 100 million per tax period. For a UAE Tax Group, the threshold of AED 100 million would apply at the level of the Tax Group. This could include cases involving complex business operations or Controlled Transactions, or where such

2028 would be the first possible tax period for a domestic UAPA. Pre-filing and submission would need to be completed this year, with at least six months required for pre-filing based on the FTA’s indicative timelines.

Businesses seeking to enter into a UAPA for domestic Controlled Transactions should therefore begin the process of stress-testing their transfer pricing pricing data and positions, and then gathering the particulars that would be requested and discussed with the FTA during pre-filing.

How Aurifer’s TP specialists can assist

Our transfer pricing team has multi-jurisdictional TP dispute resolution experience, and in the UAE has already been building relationships with the FTA through consultation and training.  We will be happy to discuss and workshop with you the pros and cons of entering into an APA such that you can make an informed decision on how best to proceed.  Should you subsequently wish to enter into an APA, we will support you throughout the end-to-end process.

Controlled Transactions have been historically subject to audit. Controlled Transactions that fall under safe harbour provisions, including low value-adding intra-group services, would not be taken into consideration for APAs.

Domestic Controlled Transactions may be covered under a UAPA if the Person and its domestic related party are subject to different tax rates or are eligible for any tax incentives under the Corporate Tax Law.

Materiality is not the sole criterion for acceptance or rejection of an application, and the FTA will evaluate each request based on its specific facts and circumstances, including the complexity of the Controlled Transactions, the potential for tax risk, and the overall benefit of entering into an APA.

APA fees

A non-refundable fee of AED 30,000 applies at the time of filing the APA application. This fee is inclusive of any revisions/ amendments to the APA application. In case of renewal of an APA, a Person is required to pay a non-refundable fee of AED 15,000.

Timeline and stages of an APA application

A Person must submit the UAPA application within two months from the date of approval of the notification of the pre-filing consultation (see below) by the FTA, or at least twelve months prior to the commencement of the first tax period to be covered under the UAPA, whichever is earlier. Prior to submission of the application itself, a Person wishing to enter into an APA will need to make a request to the FTA (via e-mail APA@tax.gov.ae or EmaraTax) for a pre-filing consultation, which will provide the opportunity for both parties to assess the possibility of an APA.

After the pre-filing meeting and upon notification to proceed, a Person may proceed to submit the application in the format specified by the FTA (English or Arabic language).  Only a Tax Agent registered for UAE Corporate Tax purposes with the FTA may submit the APA request on behalf of the Person in the prescribed form.

The FTA will then review the application, which may involve site visits and interviews, and if it decides to proceed will commence evaluation and analysis. The Person will have the opportunity to negotiate with the FTA to reach a mutually agreeable position.

Any Person who has entered into an APA with the FTA is required to file an APA Annual Declaration for each tax period covered under the APA.

Initial reflections

Our transfer pricing team has multi-jurisdictional TP dispute resolution experience, and in the UAE has already been building relationships with the FTA through consultation and training.  We will be happy to discuss and workshop with you the pros and cons of entering into an APA such that you can make an informed decision on how best to proceed.  Should you subsequently wish to enter into an APA, we will support you throughout the end-to-end process.

As 2025 has closed and 2026 has begun, we at Aurifer rewind the tape of the last intense year while anticipating developments in the GCC region and beyond.

Here is a list of 10 spotlights Aurifer has singled out for our clients in 2026.

1) Domestic VAT refund requests within 5 years

The VAT amendments are crucial for businesses in VAT refund positions. These businesses must review VAT balances and submit refund claims within the prescribed time limits. Excess recoverable input VAT is now subject to a five-year limitation period from the end of the tax period, after which the right to a refund lapses.

Transitional provisions apply to VAT refund claims that expired under the five-year limitation rule, with a grace period until 31 December 2026 to submit refunds or utilize balances.

2) E-invoicing in the UAE

Businesses must prepare for the UAE e-invoicing implementation, with 2026 as the transition period before mandatory adoption. E-invoicing will require ERP upgrades, improved data quality, and aligned tax, finance, and operational processes.

By 31 July 2026, UAE businesses with a turnover of more than 50 million AED must appoint an Accredited Service Provider.

3) Substantially more tax audits

UAE businesses should expect increased tax audit activity as Corporate Tax, VAT, and Excise tax regimes mature.

Tax authorities use data from multiple filings to identify audit risks. Excise tax audits remain strict, VAT audits are increasing, and initial CIT audits have commenced.

4) More beneficial VAT and Excise tax penalty regime

As audit activity increases, tax disputes will become more frequent, with clearer administrative processes, procedural requirements, and emphasis on documentation and timelines. In cross-border matters, treaty-based mechanisms such as mutual agreement procedures may become more prominent.

The UAE has adopted a new penalty regime for VAT and Excise disputes, mirroring the CIT regime, which is more beneficial for taxpayers and will enter force from 14 April 2026.

5) Greater emphasis on statutory audit

For CIT purposes, free zone entities seeking QFZPregime benefits and mainland entities with turnover above 50 million AED require audited financial statements, increasing the need for accuracy.

As the CIT regime is built on IFRS standards, strict adherence is required, and audit quality must improve.

6) Further TP enforcement

Transfer Pricing (TP) enforcement is expected to expand, with the UAE’s regime shifting from initial compliance reviews to substantive audits in 2026. The UAE will enable negotiation of Advance Pricing Agreements (APAs) for TP purposes, similar to KSA.

Authorities are emphasizing regional comparables and UAE- specific value creation over global policies. Businesses must adopt a proactive approach to Transfer Pricing governance as regulations evolve.

7) Limited time periods for audits

Recent amendments introduce a five-year limitation period for tax audits and assessments, with statutory exceptions.

The standard period is five years, but it may be extended to 15 years for fraud or tax evasion cases. Refund claims in the fifth year may be audited for an additional 2 years.

8) Pillar 2 in the GCC

Multinational groups in the UAE will face the impact of the Domestic Minimum Top-Up Tax (DMTT), which implements the OECD’s global minimum tax under Pillar Two. The rules apply from 1 January 2025, with 2026 marking the operational transition.

Groups with revenues of EUR 750 million or more are affected, even when paying the UAE’s 9% CIT. DMTT requires system enhancements and reporting process updates, including tax position reconciliation and relief assessment. UAE groups must prepare early to manage the complexity of compliance. Similar regimes exist in Oman, Kuwait, Bahrain, and Qatar, while KSA hasn’t taken a position.

9) Reduced compliance obligations for imported goods and services

Businesses using the reverse-charge mechanism for UAE VAT may benefit from reduced compliance obligations.

While formal invoicing requirements are waived, companies must maintain documentation to support VAT treatment.

10) Substance and CbC reporting focus

Tax authorities across the region will strengthen enforcement of economic substance and Country-by-Country (CbC) reporting requirements.

In the UAE, these regimes serve as risk-assessment tools, showing multinational groups’ global footprints and helping assess the alignment of profits with economic activity.

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