A&M Middle East Tax & Customs Newsletter | Summer Edition

Waiver of UAE CT Registration Penalties

On May 5, 2025, the UAE Federal Tax Authority (FTA) announced a penalty waiver initiative for late CT registration, shared via their LinkedIn page and local media channels.

Under this initiative, late registration penalties may be waived or refunded if a taxpayer submits their CT return within seven months from the end of their first tax period. The aim is to encourage early compliance and support businesses navigating the new CT regime.

Key scenarios covered:

• Unpaid Late Registration Penalties: Will be waived if the CT return is filed within the seven month window
• Paid Penalties: Will be refunded to the taxpayer’s account if the CT return is submitted within seven months following the end of their first tax period
• Unregistered Taxpayers: Can avoid penalties by registering and filing within the seven month period
• Exempt Persons (e.g., QIFs): May also benefit if their declaration is submitted within seven months of their first tax period

For further information on the waiver of UAE CT registration penalties, please click here.

Guidance on Interest Deduction Limitation Rules

The UAE FTA has issued a detailed guide clarifying the Interest Deduction Limitation Rules under the UAE CT regime. The guidance expands on Ministerial Decision No. 126 of 2023, offering a broad definition of ‘Interest’ that goes well beyond IFRS. It includes payments economically equivalent to interest, Islamic finance profits, premiums, discounts, and certain finance related fees.

Key highlights include:

• Clear guidance on what qualifies as ‘Interest’ under UAE CT Law
• Rules for capitalised interest, hybrid instruments, and Islamic financial products
• Special considerations for inconsistent permanent establishments, historical financial liabilities, and Qualifying Infrastructure Projects
• Specific guidance for businesses using the cash basis of accounting
• Implications for those electing Small Business Relief
• Carryforward rules for disallowed Net Interest Expenditure (up to 10 years)

For further details on this guide, please click here.

Release of UAE Family Foundations Guide

The UAE FTA has released new guidance (CTGFF1 and Decision No. 5 of 2025) on the CT treatment of Family Foundations.

The top five key takeaways include:

• What is a family foundation?
• Who can be a beneficiary?
• Multi-tier structures
•  Registration rules
• Ongoing compliance obligations

For further information on this article, please click here.

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

FTA Introduces a Formalised Framework for Reporting Natural Shortages

On June 17, 2025, the UAE FTA issued Decision No. 6 of 2025, introducing a structured process for reporting natural shortages of excise goods in Designated Zones. The Decision took effect on July 1, 2025 and significantly updates prior procedures. This decision replaces the discretionary relief under EXTP007 with standardised procedures and third-party verification. It applies only to natural losses – other types (e.g., fire, theft) remain under existing guidance.

What’s changing?

• Mandatory Pre-Approval: Businesses must now obtain FTA approval for excise losses caused by natural factors during production, transport, or storage
• FTA-Approved Assessments: Loss thresholds must be determined by an Independent Competent Entity (ICE) – a certified lab that inspects operations and issues a formal report
• Annual Validity: ICE reports are valid for up to 12 months; changes in production / storage require reassessment
• Strict Documentation: Real-time stock reconciliation, ICE findings, and audit-ready records are mandatory

For further details on this decision, please click here.

TRANSFER PRICING UPDATES

Navigating International Tax Disputes: A Closer Look at the UAE’s Mutual Agreement Procedure Guidance

In June 2025, the UAE Ministry of Finance issued updated guidance on the Mutual Agreement Procedure (MAP) – a treaty-based mechanism to resolve double taxation disputes through negotiations between tax authorities.

With CT and Transfer Pricing (TP) rules fully in effect, the guidance is timely and relevant for UAE-based multinationals facing cross-border tax issues, such as PE challenges, TP adjustments, or dual residency.

Key highlights:

• MAP requests must be filed within 3 years of becoming aware of the issue
• The MoF leads negotiations; the FTA provides support and implements agreements
• Self-initiated TP adjustments are allowed but must be made in good faith and supported by documentation
• Unilateral Advance Pricing Agreements (APA) applications begin in Q4 2025, with further APA options expected
• Taxpayers must choose between MAP or domestic litigation – both cannot run in parallel

For further information regarding the UAE’s MAP guidance, please click here.

E-INVOICING AND TAX TECHNOLOGY UPDATES

Ministry of Finance Releases UAE PEPPOL International (PINT AE) Specifications

On June 9, 2025, the UAE Ministry of Finance released the non-official English translation of the PINT AE e-invoicing specifications, published in October 2024, establishing the technical framework for the country’s phased e-invoicing rollout.

Key highlights:

• Defines invoice and credit note formats, mandatory fields, and technical rules
• Introduces six invoice types and mandates classification of special transactions (e.g., free zones, e-commerce)
• Imports excluded, intercompany transactions still under review
• Attachments (like reports) are allowed, but not invoice copies
• Further clarification is expected on PDF formatting and Tax Data Document content

For further details on the PINT AE e-invoicing specifications, please click here.

GCC COUNTRIES UPDATES

OMAN

Introduction of Personal Income Tax

On June 22, 2025, Oman issued Royal Decree No. 56/2025, which introduces a five percent income tax on natural persons whose annual gross income exceeds OMR 42,000 (approximately USD 109,200). The law will be effective from January 1, 2028. The Personal Income Tax Guide was published in the Official Gazette on June 30, 2025.

For further details on this guide, please click here.

BAHRAIN

Updated VAT Guides

The National Bureau for Revenue (NBR) updated its VAT Real Estate and VAT Retail and Wholesale Guides on June 25, 2025.

Key changes: 

• Starting January 1, 2025, the rental of retail and promotional stands in malls and commercial centers is subject to 10 percent VAT if the supplier is VAT-registered. This is a significant clarification, as such rentals were previously often considered VAT-exempt
• While sales and leases of residential and commercial properties remain largely VAT-exempt, this new rule clarifies that retail and promotional stand rentals are taxable

For further information on the VAT Real Estate Guide, please click here. For further information on the Retail and Wholesale Guide, please click here.

ARTICLES

In addition to the updates mentioned above, we have also published the following articles:

What is Operational Transfer Pricing (OTP) and why should you care?

The global tax environment is rapidly evolving, with increasing focus on transparency, compliance, and real-time data – particularly in light of BEPS 2.0, Pillar 2, and new Corporate Income Tax (CIT) regimes across the Middle East.

To meet these demands, multinational enterprises (MNEs) are turning to OTP – a framework that integrates transfer pricing (TP) into the day-to-day operations, leveraging real-time data to monitor margins, ensure compliance, and reduce the risk of audits and disputes.

Why OTP matters:

• Real-time visibility into intercompany transactions
• Alignment of TP with commercial reality
• Better data for Pillar 2 and other global tax requirements
• Reduced year-end true-ups and audit risks
• Improved cross-functional collaboration across tax, finance, and IT

The article also delves into the following key areas: 

• Key themes driving OTP adoption
• Common implementation challenges
• Practical steps to identify and act on low-hanging fruit
• The link to Pillar 2.

Ultimately, operationalising TP policies enables businesses to adapt swiftly to evolving regulations, maintain transparent records that defend against disputes, and continue driving sustainable, compliant growth across global markets. For further details on this article, please click here.

The Evolution of Tax Departments in the GCC

The tax environment in the GCC has rapidly evolved from a low-complexity, compliance-light setting into a mature and strategic tax landscape, shaped by the introduction of CT, Pillar 2, and e-invoicing. Historically, most businesses operated tax-free and lacked formal tax departments. This legacy is now being challenged by a wave of regulatory change.

Key highlights:

• From Reactive to Strategic: The shift from VAT to CT and BEPS Pillar 2 has made tax a core business function, demanding strategic oversight and cross-functional collaboration. Heads of Tax are now expected to inform pricing, structuring, and broader commercial decisions
• Evolving Tax Function: Many businesses are moving from outsourced models to building in-house tax capabilities, but still face resource and technology gaps. Tax teams are under pressure to manage complex reporting, deferred tax accounting, and new audit risks
•  Governance and Technology Gaps: With data-driven enforcement and digital tax regimes emerging, companies must strengthen internal controls, define clear tax policies, and embed tax in business processes. Tax functions need to assess the right technology and operating model for long-term success
• Cross-Border Oversight Challenges: As CFOs demand better oversight across jurisdictions, GCC-based tax teams must balance strategic oversight with limited influence at the local level
• Strategic Imperative: A clear tax strategy, sourcing model, and governance framework are critical for businesses looking to stay compliant and competitive in this new tax environment

For further information on this article, please click here.

Stay tuned for our upcoming publications, where we will delve deeper into key aspects of this transformation, providing practical insights to help your organisation navigate the evolving GCC tax landscape.

A&M TAX TALKS MIDDLE EAST PODCAST

Episode Four – Business Trends for Family Business and Private Clients in the UAE 

The fourth episode of our Tax Talks Middle East podcast series has been released. In this episode, our tax experts explore UAE CT landscape and its impact on Family Businesses and Private Clients, discussing business trends, generational challenges, growth opportunities, and the importance of proper structure and governance.

Click here to listen to the episode.

For any questions around implementing these key tax updates, please reach out to a member of the A&M Tax Team (listed on this page).