Bahrain Government Introduces Fiscal Reforms

Insights

January 2, 2026

Bahrain Government Introduces Fiscal Reforms

The Government of Bahrain has announced a series of initiatives aimed at improving the country’s financial situation while ensuring continued support for citizens. The measures, approved by the Cabinet, focus on optimizing government spending, increasing revenue, and promoting sustainable economic growth. The initiatives include:

Corporate Revenue Law

A new law will impose a 10% tax on profits exceeding BHD 200,000 or on companies with revenues over BHD 1 million.
This law aims to diversify income sources and is expected to be applied in 2027 after legislative approval.
To protect local employment, key sectors affecting national jobs will be exempt, and incentives will encourage hiring Bahraini workers.

Reducing Administrative Expenses

All government entities will cut administrative costs by 20% while maintaining the service quality of services provided to citizens.

Increasing Contributions from State-Owned Companies

Government-owned companies will contribute more to the state budget.

Selective Tax on Soft Drinks

A law will be referred to the legislature to increase selective taxes on soft drinks, promoting healthier consumption, improving public health, and optimizing healthcare resources.

Investment Land Fees

Monthly fees of BHD 0.100 per square meter will apply to undeveloped investment lands with full infrastructure services starting January 2027.
The categories include mixed-use buildings, tourism and entertainment areas (hotels, resorts, restaurants, cafés), commercial zones (malls, showrooms, commercial blocks), and service areas (education, healthcare, sports, fuel stations, parking).
Fees will be collected when applying for a building permit or when selling the property.

Sewerage Service Fees

To maintain infrastructure sustainability, new sewerage fees will be introduced in January 2026.
The first residential property will be excluded, and fees will be 20% of water consumption costs.

Work Permit Fees for Foreigners

To prioritize Bahraini employment, work permit fees will gradually increase starting January 2026.
The fee for issuing work permits will rise from BHD 105 to BHD 125, monthly fees will increase from BHD 10 to BHD 30.
Healthcare fees for foreign workers will go from BHD 72 to BHD 144 over a four-year period.
Domestic workers will remain exempt.

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UAE VAT Update: Introduction of Reverse Charge Mechanism on Metal Scrap Trading

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December 29, 2025

UAE VAT Update: Introduction of Reverse charge mechanism on Metal Scrap Trading among registrants in the state for the purpose of VAT (Effective From 14th January 2026)

The Federal Tax Authority (FTA) has introduced an important update on the VAT treatment of metal scrap supplies through Cabinet Decision No. 153 of 2025, issued on November 14, 2025, and effective from January 14, 2026. The decision mandates the application of the Reverse Charge Mechanism (RCM) on metal scrap transactions between VAT-registered persons.

Under the decision, the reverse-charge mechanism will apply to eligible supplies between registrants within the metal-scrap sector.

Prior to this decision, supplies of metal scrap were treated as normal taxable supplies for UAE VAT purposes and were subject to either the standard rate or zero rate, depending on the nature of the supply, such as whether it was a local supply or an export.

Key Difference: Old rule vs new rule

Particulars Type	Old rule (Before 14 Jan 2026)	New rule (After 14 Jan 2026)
VAT charged on Invoice	Standard Rated (5%)/ Zero rated (0%)	No VAT Charged
Invoice Type	Tax Invoice	Tax Invoice (RCM Reference)
Responsibility of VAT Reporting	Supplier	Buyer (Under RCM)
Declaration	Not Required	Mandatory
Compliance Risk	Normal	Higher (Due to documentation Requirement)

Compliance Responsibilities

Buyer (Prior to supply)

The buyer shall provide a written declaration confirming that the scrap is intended for resale or processing.
The buyer shall provide a written declaration confirming that the buyer is registered for Value Added Tax (VAT).

Supplier (Prior to supply)

Must obtain and retain both declarations received from the buyer.
Verify the recipient VAT registration through FTA-approved means
Issue an invoice explicitly stating the reverse charge mechanism

Failure to meet these requirements will result in the application of normal VAT rules.

*Declaration Format not issued by FTA specifically for the Metal Scrap sector till now.

Practical Implications for Businesses

Cash Flow: Buyers will no longer need to pay VAT on purchases, and suppliers will not be required to charge output VAT on supplies.

Compliance Responsibility: Both suppliers and buyers are required to maintain and obtain proper documentation

Changes in Business Process: Business must update the invoicing system, internal controls and contracts before January 2026.

Recommended Action Plan

Identify transactions related to metal scrap trading
Update invoice templates
Strengthen or alter contract clauses related to VAT responsibilities
Declaration format for Buyer
Configure the accounting system for RCM

Conclusion

The Introduction of the reverse charge mechanism on metal scrap trading mark a significant shift in the UAE VAT framework. These changes transfer the VAT accounting responsibility from the supplier to VAT-registered buyers, while placing greater emphasis on documentation and verification procedures.

Businesses involved in metal scrap transactions must take proper steps to assess the impact of this change, update their system and contacts and ensure that all required declarations and controls are in place.

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UAE VAT Reforms 2025: Federal Decree – Laws 16 & 17 – Key Changes in VAT Compliance Requirements

Insights

December 19, 2025

The Ministry of Finance issued two key legislative updates in October 2025:

Federal Decree-Law No. 16 of 2025 – Amending selects provisions of Federal Decree-Law No. 8 of 2017 (VAT Law)
Federal Decree-Law No. 17 of 2025 – Amending provisions of Federal Decree-Law No. 28 of 2022 (Tax Procedures Law)

Effective date of the amendments: January 01, 2026

Key VAT Law Amendments (Federal Decree-Law 16 of 2025)

Article 48(1) – Reverse Charge

Overview of the Amendment:

Taxable Person imports Goods or Services for the purposes of his Business, then he shall be treated as making a Taxable Supply to himself. It is therefore responsible for calculating and paying the VAT liable on this supply. The Key change is that the company does not have to send itself a tax invoice for these imported goods or services.

It is important to note that despite the amendment, self-invoicing may still be required in certain cases to facilitate recovery (where supplier invoice/documents may not be available).

Implications:

Lightens the administrative workload and enables efficient accounting practice.
Applies stronger importance on the compliance of supporting paperwork, such as contracts, supplier invoices, and proof of supply.

Article 54 – Recoverable Input Tax (New anti-tax-evasion provisions introduced)

Overview of the Amendment:

Input tax deductions will be disallowed if the supply is part of a chain linked to tax evasion and the Taxable Person was aware of this relation upon deducting the Recoverable Input Tax.
Input tax deductions may also be denied if the taxpayer ‘should have known’ based on the circumstances of the supplies related to Tax Evasion.
For the purposes of applying the provisions of Clause 2 of this Article, a Taxable Person shall be deemed to be aware of the tax evasion in the supply chain if they fail to verify the validity and integrity of supplies before claiming input tax in accordance with the conditions, procedures and measures determined by the FTA.

Implications:

Strong internal control & approval is required for tax invoices to claim the input VAT.
Appropriate & sufficient documentation is required for Input VAT claims and to reduce fines.

Article 74(3) – Excess Recoverable Tax.

Overview of the Amendment:

Excess input tax may be carried forward for a period of five years from the end of the tax period in which it arose.
After the expiry of five years from the end of the relevant tax period, such input tax credit can no longer be utilized, offset against output tax, or claimed as a refund.

Implications:

Finance teams should ensure that these excess credits have been claimed by reconciling past VAT balances by filing VAT refund application.

Transitional Provision allowing one year window until December 31, 2026

Overview of the Amendment:

Taxpayers whose five-year claim period has expired or will expire within one year of the Decree-Law’s effective date can still request a refund or apply credit balances toward tax due or penalties.

With the introduction of the amendments (including transitional relief), businesses have a limited window until 31 December 2026 to claim refunds for tax periods 2018–2020. After this date, the right to recover these amounts will permanently expire.

Business Implications:

Businesses should promptly review VAT records for FY 2018–2020, as any unclaimed input tax must be recovered by 31 December 2026. Amounts not claimed by this deadline will be permanently lost, adversely impacting cash flow.

Illustrations 1

Scenario

ABC Trading LLC filed its VAT return for the quarter Jan to March 2018.
Due to capital expenditure, the company reported excess input VAT of AED 120,000.
No refund application was submitted, and the balance was carried forward in subsequent VAT returns till Dec 2025.

Application of the Amendment

The five-year period starts from the end of the tax period (31 March 2018).
The excess input VAT should be utilized, offset, or claimed as a refund on or before 31 March 2023. As five years to claim the input tax credit period is already expired, the FTA granted the transitional relief and permitted the submission of the VAT refund application on or before 31 December 2026.
If ABC Trading LLC does not submit the VAT refund application by 31 December 2026, the excess input VAT of AED 120,000 will lapse and cannot be utilized, offset, or refunded in any future VAT return.

Illustrations 2

Scenario

XYZ VAT Group consists of Parent Co and Subsidiary A.
In the VAT return for Q2 2022 (Apr–Jun 2022), the VAT Group reported excess input VAT of AED 300,000, mainly arising from Subsidiary A.
The excess credit was carried forward in the VAT Group’s subsequent returns and not claimed till December 2025.

Application of the Amendment

The five-year limitation period begins from 30 June 2022.
The VAT Group should utilize, offset, or submit a refund application by 30 June 2027.
If the VAT Group does not submit the VAT refund application by 30th June 2027, the excess input VAT of AED 300,000 will expire and cannot be refunded, even if the relevant group member is later de-registered or removed from the VAT Group.

Article 79 (bis)

This law has been officially repealed and is no longer applicable.

VAT-Relevant Tax Procedures Law Amendments (Federal Decree-Law No. 17 of 2025)

Article 9 (3) -Determination of Payable tax

Overview of the Amendment:

Taxable Person pays an amount in excess of the Payable Tax, or has a credit balance with the Authority, the Authority may apply such excess or credit balance to settle any outstanding tax or liabilities due to it, within a period not exceeding five (5) years from the end of the relevant Tax Period.

Business Implications:

It helps in reconciling accurately and timely.
This supports effective cash flow management

Article 10(5) -Voluntary Disclosure

Overview of the Amendment:

If a Taxpayer discovers an error or omission in a Tax Return submitted to the authority that does not result in any difference in the amount of Due Tax, such errors are required to be corrected through a Voluntary Disclosure only in the cases specified by the Authority. In all other cases, the Taxpayer may rectify the error in the subsequent VAT return.

Business Implications:

Minimising administrative burden and compliance risk.

Article 38(1-2)- Application for refund of credit balance

Overview of the Amendment:

Refund claims (which are in excess of due tax and penalties) must be submitted within five years of the relevant tax period.

Article 38(3-6)- Application for refund of credit balance- New Clauses added

Introduces special timelines as an exception to the five-year rule:

Clause 3: If a credit balance arises from an FTA decision after the five-year period or in the last 90 days of that period, the taxpayer has one (1) year from the date the balance arose to submit a refund request.
Clause 4: Without prejudice to the provisions of Clause 3 of this article where the credit arises after the five-year period or in the last 90 days, the taxpayer has 90 days from the date the balance arose to submit a refund request.
Clause 5: The FTA must review refund requests and notify the taxpayer of its decision for approval or rejection.
Clause 6: If the refund request is not submitted within the specified timelines, the taxpayer’s right to claim the refund expires permanently.

Article 46- Statute of limitations

Overview of the Amendment:

Except in certain specific situations, the UAE VAT Law prohibits the tax authorities from auditing a business or issuing a tax assessment for a VAT period after five years have elapsed. If the taxable person submit VAT refund application in the 5th year or on any late VAT credit periods, the FTA can still conduct audit which must be completed within 2 years from when the claim was submitted. Further, voluntary disclosures are generally not allowed to be submitted beyond five years, except in cases where they relate to an unresolved refund application.

Article 54(bis)

Overview of the Amendment:

The FTA may issue official, legally binding directions to clarify VAT interpretation and ensure uniform application across taxpayers.

Practical Measures

The Taxpayer should Review all VAT credit balances and submit any pending VAT refund applications before the statute of limitations takes effect.
Ensure that all transactions are recorded with consistent and acceptable VAT treatment to minimize compliance risks and audit exposure.

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Insights

VAT Implication of Shipping and Logistics Sector

Insights

October 30, 2025

The shipping and logistics sector is the backbone of global trade. In the United Arab Emirates (UAE), this sector holds strategic importance because of the country’s geographical location and its ambition to be a world-class logistics hub connecting Asia, Europe, and Africa. The UAE’s state-of-the-art ports, airports, and free zones have made it a preferred destination for global supply chains and multinational businesses.

With the introduction of Value Added Tax (VAT) in January 2018, companies operating in shipping, freight forwarding, and logistics have had to understand and comply with a new set of tax rules. While the VAT framework is designed to be business-friendly, the sector’s complex mix of local and cross-border services makes it critical for companies to know when to charge VAT, when zero-rating applies, and when a transaction is outside the scope of UAE VAT altogether.

This article explores the key VAT implications for the shipping and logistics industry in the UAE, providing an in-depth understanding of how different services are treated under the law and highlighting practical scenarios that businesses frequently face.

Understanding Shipping and Logistics

A shipping and logistics company is responsible for moving goods efficiently and securely from one location to another, whether within the UAE or across international borders. The services provided in this sector are diverse and often involve multiple stages of a supply chain. Typical activities include:

Transportation by land, sea, and air
Customs clearance and documentation
Warehousing and inventory management
Multimodal coordination (sea-air, land-air, etc.)
Order fulfilment and last-mile delivery
Freight forwarding and supply chain consultancy
Planning and managing the flow of goods from suppliers to customers
Preparing necessary paperwork (bills of lading, customs declarations, etc.)
Some logistics companies offer broader services like supply chain consulting, procurement, and returns management.

Because of this wide scope of operations, VAT treatment varies depending on the nature of the service and whether it relates to domestic transportation, international movements, or import/export activities.

Modes of transportation

Modes of transportation include Sea, Air, Road, transportation and multimodal transportation.

Sea Transport

Air Transport

Road Transport

Multimodal Transport (combining different modes)

Shipping Companies

Shipping companies are businesses that specialize in transporting cargo for a fee, primarily via sea using container ships, but also through other modes like air, rail, and road. They play a vital role in global trade by moving goods, such as raw materials and finished products, between different ports and destinations worldwide, ensuring that products reach consumers and industries efficiently and safely.

VAT Treatments

International transportation

Transactions Type	VAT Applicability	Examples
International Transportation of goods and passengers	0%	Freight from Jebel Ali to Europe; passenger flight from Dubai to London.
International Transportation of goods and passengers includes more than one stops	0%	Shipment Dubai → Riyadh → Cairo → Europe (entire trip qualifies as international).
Air passenger transport in the state considered as “International Transport Service”	0%	Abu Dhabi → Dubai leg of a flight continuing to New York.
Inbound and outbound transportation of passengers and goods (including intra-GCC)	0%	Inbound and outbound transportation of passengers and goods (including intra-GCC)
Transport related services for inbound and outbound transportation	0%	passengers flying out to Saudi Arabia.
Transportation starting and ending outside UAE	Out of Scope	Shipping goods directly from India to Oman without transiting through the UAE
Transport related services for cross border trade	Out of Scope	Goods are shipped directly from India to Oman without passing through the UAE, while the freight is billed by a UAE company.

Local Transportation

Transactions Type	VAT Applicability	Examples
Local Transportation of goods and services	5%	Trucking goods from Dubai to Abu Dhabi (not linked to import/export).
Transport related services for local transportation of goods	5%	Loading, warehousing, and packaging for a domestic delivery.
Local transport which is part/for the purpose of inbound and outbound transportation	0%	Trucking goods from Sharjah to Jebel Ali for onward shipment to Europe
Local transportation of passengers in non-qualifying means of transport	5%	Tourist desert safari, limousine service.
Local transportation of passengers in qualifying means of transport	Exempt	Mono Rail, Dubai Metro, Taxi and Bus
Supply of means of transport for the transportation of passenger and goods	0%	Sale of a cargo vessel or aircraft for commercial use

Freight Forwarding Companies

A freight forwarding company acts as an intermediary to manage the complex process of shipping goods internationally by arranging transportation, handling documentation, and coordinating logistics on behalf of a business. They do not own the transport vehicles, but instead use their network of carriers and partners to find the most efficient and cost-effective way to move cargo via sea, air, rail, or road, ensuring it arrives safely and on time.

Usually undertaking the following:

Arrangement of transportation (Door to door, door to port, port to door and port to port transportation.
Handling documentation
Insurance
Warehousing
Arrange transportation by air, sea, road, rail
Multimodal transport co-ordination

VAT Treatments

Transactions Type	VAT Applicability	Examples
Local transport which is part/for the purpose of inbound and outbound transportation	0%	Trucking goods from Sharjah to Jebel Ali for onward shipment to USA
Freight Brocker service fee	5%	Service fee charged for arranging freight forward service for an international shipment from Jebel Ali to Europe
Warehousing service for local sales	5%	Warehousing fee charged for storing goods in the port
Local transportation of goods and transport related services for local transportation of goods	5%	Goods transport from Dubai to Sharjah, and Loading, warehousing, and packaging for a domestic delivery.
Transport related services for cross border transportation	Out of Scope	Shipping goods directly from India to Oman with no UAE leg, freight charges issued UAE Company

Means of Transport

Goods can be moved by air, sea, rail, or road, and the choice of transport depends on factors such as cargo size and how urgently delivery is required. Because international transport supports the UAE’s trade and tourism growth, the VAT law provides zero-rate (0%) VAT on following types of transport and related services.

Under UAE VAT rules, the following supplies are subject to 0% VAT when used for commercial purposes:

Aircraft – Planes designed or adapted to carry passengers or goods for commercial transport (not for recreation or sports).
Ships or boats – Vessels intended for commercial activities such as cargo or passenger transport (not for leisure or private use).
Buses or trains – Vehicles built or modified to carry 10 or more passengers as part of public transportation.

Goods and services directly connected to these means of transport—such as operation, repair, maintenance, or conversion—are also zero-rated, provided the conditions of the VAT law are met.

Warehousing

Warehousing services refer to the storage of goods in a designated facility before they are distributed to their final destination, whether to retailers, other businesses, or end consumers. They are a critical component of the global supply chain and logistics sector.

VAT Treatments

Transactions Type	VAT Applicability	Examples
Warehousing service provided to customer in UAE	5%	A UAE customer stored or used warehouse facility at a warehouse in the port before clearing the goods.
Packing, re-packing, labelling etc..	5%	Re-packing service provided at warehouse for a UAE company.

Transaction Scenarios and Their VAT Implications

Scenario 1: International Shipment (Zero-Rated)

A freight forwarder arranging shipment of goods from Sharjah to Germany charges 0% VAT, as the service qualifies as international transport.

0% VAT applies to all stages, including local trucking.

Scenario 2: Domestic Shipment (Standard-Rated 5%)

A trucking company delivering goods from Jebel Ali Free Zone to a retailer in Abu Dhabi applies 5% VAT.

5% VAT applies, as transport is purely within the UAE

Scenario 3: Domestic Passenger Transport (Exempted)

A metro ride in Dubai is exempt from VAT, but a desert safari tour bus is subject to 5% VAT

Exempt from VAT

Scenario 4: Cross border transport of goods (Out of scope)

A freight forwarder arranging shipment of goods from India to Germany, this will be out of scope of UAE VAT as the transport is not starting or ending in the UAE.

Out of scope of UAE VAT

Conclusion

VAT treatment in the UAE shipping and logistics sector depends on whether the service is domestic, international, exempt, or outside the scope of UAE VAT. To remain compliant and competitive, businesses must apply the correct VAT rate and maintain precise documentation to avoid penalties.

Key compliance priorities for shipping and logistics companies include:

Accurate classification of services (domestic vs. international).
Proper documentation, such as bills of lading, Custom declarations, Exit Certificate and transport contracts, to justify zero-rating.
Timely and accurate VAT reporting to secure input VAT recovery and avoid fines.

When applied correctly, VAT does not add to the cost of international trade; instead, it promotes transparency, efficiency, and operational integrity. By understanding VAT implications and maintaining robust internal controls, shipping and logistics businesses can remain compliant, cost-effective, and well-positioned to thrive in the UAE’s strategic logistics market.

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UAE Electronic Invoicing System: MD 243 & MD 244 OF 2025

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October 4, 2025

On 29th September 2025, the UAE Ministry of Finance took a big step forward in reshaping how businesses handle tax compliance. Two new decisions were issued:

Ministerial Decision No. 243 of 2025, which sets out the rules, scope, definitions, and obligations of the new system.
Ministerial Decision No. 244 of 2025, which provides the phased rollout plan, timelines, and compliance requirements.

Together, these decisions introduce the Electronic Invoicing System (EIS) – a central, government-run platform designed to move businesses away from manual or paper-based VAT invoicing, and toward structured, digital records that are fast, transparent, and secure.

For businesses, this is not just another compliance requirement. It’s part of a wider transformation toward digitization, transparency, and efficiency in the UAE economy.

What Does E-Invoicing Actually Mean?

Before diving into obligations and deadlines, it’s worth understanding what exactly “electronic invoicing” means in the UAE context. The Ministerial Decisions define several key terms to remove ambiguity and ensure everyone speaks the same language.

1. Electronic Invoice (E-Invoice):

A VAT invoice that is issued, received, transmitted, and stored in a structured digital format. Importantly, this is not just a scanned PDF emailed to a customer. The format is machine-readable, which means it can be validated and processed automatically.

2. Electronic Credit Note:

A digital document that amends or cancels an invoice. This could apply to a return, refund, discount, or correction.

3. Electronic Invoicing System (EIS):

The central platform managed by the Federal Tax Authority (FTA). All e-invoices and e-credit notes must pass through this system for validation, reporting, and storage.

4. Accredited Service Provider:

Businesses will not connect directly to the EIS. Instead, they must use a government-accredited third-party provider who ensures that their ERP or accounting system integrates smoothly with the platform.

5. Excluded Persons and Transactions:

Certain transactions and taxpayers are excluded from e-invoicing, to reduce complexity or avoid duplication. For instance, sovereign government activities, some air transport services, and specific financial services are out of scope.

6. Pilot Programme and Taxpayer Working Group:

A trial phase where selected businesses will test the system and provide feedback.

7. Business-to-Consumer (B2C) Transactions:

For now, e-invoicing is only mandatory for business-to-business (B2B) transactions. Retail and consumer-facing sales are excluded, though they may be included in the future.

8. Revenue:

The gross income earned by a Person during the most recent Accounting Period, based on the financial statements prepared in accordance with applicable legislation in the State or, if such financial statements are not available, based on other documentation acceptable to the Authority.

This initiative extends beyond regulatory compliance, marking a strategic step in the UAE’s ongoing efforts to enhance digitization, transparency, and economic efficiency.

Why Is the UAE Introducing E-Invoicing?

At first glance, it may seem like this is just another administrative burden. But the reality is quite different. The EIS is being introduced to achieve several strategic objectives:

1. Digitization of VAT Invoicing

Paper-based invoices are slow, prone to errors, and difficult to audit. By digitizing, transactions become faster, more accurate, and easier to track.

2. Improved Compliance

Because the EIS enforces a standard format and real-time reporting, businesses will find it harder to make mistakes or omit information. The FTA will also have more visibility over VAT flows, reducing compliance risks.

3. Transparency and Cooperation

The data collected can be shared with other UAE government departments and even foreign tax authorities under international agreements, boosting trust and credibility.

4. Fraud Prevention

E-invoicing minimizes common issues like false invoicing, duplicate claims, or fraudulent VAT refunds.

5. Alignment with Global Standards

Many countries have already adopted similar systems. By implementing e-invoicing, the UAE is positioning itself within a global ecosystem of modern tax administration, making it easier for multinationals to operate here.

Scope of E-Invoicing:

The decisions make it clear that e-invoicing will apply broadly:

All VAT-registered businesses in the UAE will eventually be required to issue e-invoices for their taxable supplies.
Government entities must comply when acting in a business capacity (e.g., when charging fees or selling goods/services).
Voluntary adoption is possible even before it becomes mandatory, as long as a business meets the technical requirements.

Exemptions

Not every transaction is covered. Key exclusions include:

Sovereign government activities.
International passenger flights where e-tickets already serve as proof.
Airline ancillary services covered by e-documents.
International cargo transport by air (temporary exemption of 24 months).
Financial services that are VAT-exempt or zero-rated.
Any other exclusions announced later by the Minister.
B2C transactions, which are excluded until further notice.

What Are the Business Obligations?

Once a business is within scope, the obligations under the EIS are detailed and strict:

1. Issuing and Reporting

All taxable supplies must be supported by an e-invoice issued within 14 days of the supply date.
Credit notes must also be electronic and issued for cancellations, discounts, refunds, or corrections.
Both issuers and recipients must process and acknowledge invoices via the EIS.
All invoices must be reported to the FTA within the prescribed timelines.

2. Accredited Service Providers

Every business must connect through an accredited provider.
If there are changes to a company’s registration details, these must be shared with the provider within five business days.

As per Article 15 of Ministerial Decision No. 64 of 2025 five ARP are approved:

Cygnet Digital IT Solutions L.L.C
Comarch Middle East FZ LLC
Defmacro Software FZCO
Oxinus Holding Limited
Pagero Gulf FZ LLC

Few more ARP will be added in the above list

3. Data Requirements

E-invoices must include all the fields specified under VAT law. This ensures consistency across businesses.

4. Special Cases

Agents can issue invoices on behalf of principals.
Self-billing is permitted where both supplier and customer are VAT-registered and conditions are met.

5. Data Storage

All e-invoice data must be stored within the UAE for the retention period required under the Tax Procedures Law.

6. System Failures

If your systems go down and you cannot comply, you must notify the FTA within two business days.

What Powers Does the FTA Have?

The system will give the Federal Tax Authority significant visibility and control:

Access & Verification: The FTA can access invoice data anytime for audit or verification.
Data Sharing: Invoice data may be shared with other UAE government entities or foreign tax authorities under international agreements.

This reinforces the dual role of the EIS: enforcing domestic VAT compliance while also supporting the UAE’s global tax transparency commitments.

Phased Implementation Timeline

The transition will not happen overnight. The Ministry has wisely chosen a phased approach:

Phase 1 – Pilot Programme

Launch date: 1 July 2026.
Participants: A select group of businesses forming the “Taxpayer Working Group.”
Purpose: To test the system, fix issues, and fine-tune before mass adoption.

Phase 2 – Voluntary Adoption

Starting 1 July 2026, any business can voluntarily adopt the system if they are ready.

Phase 3 – Mandatory Adoption

Deadlines depend on business size and type:

Large Businesses (Revenue ≥ AED 50 million):

Must appoint an accredited provider by 31 July 2026.
Mandatory adoption from 1 January 2027.

2. Other Businesses (Revenue < AED 50 million):

Must appoint a provider by 31 March 2027.
Mandatory adoption from 1 July 2027.

3. Government Entities:

Must appoint a provider by 31 March 2027.
Mandatory adoption from 1 October 2027.

4. B2C Transactions:

Excluded until a new decision says otherwise.

Enforcement and Penalties

Both decisions came into force immediately after being published in the Official Gazette.

Any earlier rules that contradict them are repealed.
Penalties for non-compliance will follow the existing UAE VAT and Tax Procedures Law framework. This means businesses could face fines for failing to issue e-invoices, late reporting, or not sto

The Bigger Picture

This system is about more than tax reporting. It represents a strategic shift in how the UAE manages taxation and supports its digital economy agenda.

Key benefits include:

Supporting the UAE’s smart economy vision.
Improving accuracy and timeliness in VAT reporting.
Reducing paperwork and administrative burdens.
Giving the FTA stronger audit and monitoring tools.
Preparing the groundwork for AI, blockchain, and advanced analytics in tax administration.
Strengthening investor confidence by aligning with OECD guidelines and international best practices.

Practical Takeaways for Businesses

For companies operating in the UAE, the message is clear: don’t wait until the last minute. Preparing early will not only reduce compliance risks but may also unlock operational efficiencies.

Action to be taken:

Start Early

Large businesses should already be planning their transition. Waiting until mid-2026 will be risky.
Choose an Accredited Provider

Research and select an FTA-accredited service provider to ensure your systems can integrate smoothly with the EIS.
Upgrade Systems

Make sure your ERP, POS, and invoicing systems are capable of producing and transmitting structured e-invoices.
Train Staff

Finance, invoicing, and compliance teams will need training to handle new workflows.
Stay Informed

Watch for updates on B2C inclusion or further sector-specific exemptions.

Conclusion

Ministerial Decisions No. 243 and 244 of 2025 establish the legal and operational backbone of the UAE’s Electronic Invoicing System. Decision 243 lays out the framework, scope, and obligations, while Decision 244 sets the roadmap for phased adoption.

By 2027, nearly all VAT-registered businesses and government entities in the UAE will be required to issue and process e-invoices through the EIS.

For businesses, this is both a compliance requirement and an opportunity:

a chance to modernize systems, streamline processes, and build trust with regulators and partners.
By preparing early, companies won’t just avoid penalties they’ll also be better positioned to use e-invoicing as a competitive advantage in an increasingly digital economy.

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UAE VAT Treatment of Passenger Transportation Services

VAT Treatment of Passenger Transportation Services in the UAE

Insights

October 3, 2025

Passenger transportation services are widely used across the UAE, particularly by corporates to facilitate the commute of employees and by hotels to enhance the experience of their guests. While such services appear straightforward, their treatment under the UAE VAT Law requires careful attention.

This article provides a detailed overview of the VAT implications of passenger transportation services in light of Federal Decree-Law No. (8) of 2017 on Value Added Tax (“VAT Law”), Cabinet Decision No. (52) of 2017 on the Executive Regulations (“Executive Regulations”), and its amendments issued by the Federal Tax Authority (FTA).

Legal Basis for Exemption

Article 45 of the Executive Regulations provides that local passenger transport services supplied in a qualifying means of transport (by land, water, or air) are exempt from VAT.

A qualifying means of transport is defined as any Motor vehicle designed or adapted for passenger transportation, including:

Taxis,
Buses,
Railway trains,
Trams,
Mono-rails, or similar vehicles.

Importantly, the legislation does not restrict this exemption only to “public” transportation. Services provided to private groups, such as employees of companies or hotel guests, also qualify for the exemption as long as the core activity is passenger transportation in a qualifying vehicle.

Key Clarifications from the FTA

The FTA has clarified several critical points that businesses should consider when determining the VAT treatment of their transportation services:

Transportation for Employees

Where a business provides transportation services to employees of corporates on a contractual basis using buses or other qualifying means of transport, these services fall within the VAT exemption.

Transportation for Hotel Guests

Transport services arranged for hotel guests are also generally exempt. However, businesses must carefully assess the nature of these services. If the principal purpose of the trip is pleasure, leisure, or entertainment (e.g., sightseeing tours or recreational trips), the exemption will not apply, and VAT at the standard rate 5% should be charged.

Distinction Between Transportation and Leasing

The exemption strictly applies to the supply of passenger transport services. If a company merely leases or rents buses without providing actual transport services, the arrangement does not qualify for exemption and is subject to VAT at 5%.

Any Value-added services beyond passenger transport are taxable at 5%.

For example:

Bus branding (where the customer requests logos or advertisements on vehicles),
Provision of other add-ons outside the scope of transportation.

These ancillary supplies are not covered by the exemption and must be charged at the standard VAT rate at 5%.

Practical Implications for Businesses

Businesses engaged in transportation services must carefully review their contractual arrangements and service structures to determine VAT applicability. Some practical considerations include:

Ensure contracts clearly specify whether the arrangement is a transportation service or a lease of vehicles.
Separate invoices or line items should be maintained for exempt transport services and taxable add-ons (e.g., branding fees).
Hotels must carefully review whether guest transportation qualifies as exempt (e.g., airport transfers) or is taxable at 5% (e.g., leisure tours).
Maintain proper documentation to demonstrate that qualifying means of transport are being used and that services meet the exemption criteria under Article 45.

Conclusion

The UAE VAT regime provides an exemption for local passenger transport services when supplied using qualifying means of transport. Importantly, this exemption is not limited to public transport but extends to services for defined groups such as employees of corporates and hotel guests.

However, businesses must draw a clear distinction between exempt passenger transport and taxable supplies such as vehicle leasing or additional services like branding. Incorrect classification could lead to VAT non-compliance and potential penalties.

By carefully reviewing the scope of services, maintaining clear contractual terms, and ensuring accurate VAT treatment, businesses can remain compliant while delivering essential passenger transport solutions across the UAE.

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Corporate Tax Rules Changed for UAE Free Zones

Insights

September 8, 2025

The Federal Tax Authority (FTA) has issued Ministerial Decision No. 229 of 2025 (MD 229) and Ministerial Decision No. 230 of 2025 (MD 230), introducing significant updates to the definitions of Qualifying Activities and Excluded Activities for Qualifying Free Zone Persons. These decisions repeal and replace Ministerial Decision No. 265 of 2023, particularly updating the Definitions of Qualifying Commodities and other qualifying activities, and provide enhanced clarity for the application of Corporate Tax rules within Free Zones.

Section	Ministerial Decision No. 265 of 2023	Ministerial Decision No. 229 of 2025
Changes and Additions to the Definition Section
Qualifying Commodities	Earlier in MD 265 the scope was limited to Metals, minerals, energy and agriculture commodities traded on a Recognized Commodities Exchange Market in raw form.	The earlier definition is now broadened and clarifies the scope of the trading of Qualifying Commodities by removing the term “in raw form” and instead allowing the trading of metals, minerals, industrial chemicals, energy and agricultural commodities and Associated By-products, provided that a Quoted Price for such commodities exists. A Quoted Price is a price of the Qualifying Commodity or a Related Commodity specified by a Recognised Commodity Exchange Market or a Recognised Price Reporting Agency specified by a decision issued by the Minister. (Refer below for the list of Recognised Price Reporting Agencies) Environmental commodities being tradeable assets that represent a specific environmental benefit (e.g., carbon credits, renewable energy certificates).
Recognized Commodities Exchange Market	It was described as any commodities exchange market established in the State that is licensed and regulated by the relevant Competent Authority, or any commodities exchange market established and recognized outside the State of equal standing	This has been expanded to also include commodities exchange market established and recognised outside the State that are licensed and regulated by the relevant foreign authority in the jurisdiction of establishment, or as specified in a decision issued by the Minister.
Competent Authority	MD 265 defined the Competent Authority as only The Central Bank of the United Arab Emirates, the Dubai Financial Services Authority of the Dubai International Financial Centre, the Financial Services Regulatory Authority of the Abu Dhabi Global Market and the Securities and Commodities Authority as applicable.	The definition now has a wider coverage to include all of the earlier authorities plus any other entity as determined by the Minister, as applicable.
Quoted Price	No such definition was provided earlier	A new definition has now been added as the price of the Qualifying Commodity or a Related Commodity specified by a Recognized Commodity Exchange Market or a recognized price reporting agency** specified by a Ministerial decision.
Associated By-product	No such definition was provided earlier	Incidental or secondary product made during the production or extraction of the metal, mineral, industrial chemical, energy and agricultural commodity.
Related Commodity	No such definition was provided earlier	Any commodity that is listed in the same chapter in the Common Schedule for Classification and Coding of Goods as a Qualifying Commodity that has a Quoted Price.
Common Schedule for Classification and Coding of Goods	No such definition was provided earlier	Classification and Coding of Goods as a Qualifying Commodity that has a Quoted Price. Common Schedule for Classification and Coding of Goods It means the Common Schedule for the Classification and Coding of Goods for the Gulf Cooperation Council Countries adopted pursuant to Cabinet Decision No. 119 of 2024 referred to above or any legislation that amends or replaces it.
Revised Provisions under Article 2 of Ministerial Decision No. 265 of 2023
Treasury & Financing Services	The scope was limited to providing treasury and financing services only to Related Parties.	This has been broadened to cover treasury and financing services to Related Parties or for its own account.
Trading of Qualifying Commodities	Earlier Trading of Qualifying commodities included 1. Physical trading of Qualifying Commodities. 2. Associated financial derivatives trading used to hedge risks from such activities.	Now, Trading of Qualifying Commodities means: 1. Physical trading of Qualifying Commodities. 2. Associated financial derivatives trading used to hedge risks from such activities. 3. Associated structured commodity financing activity. Provided this activity cannot be conducted by a Qualifying Free Zone Person if revenue from distribution, warehousing, logistics, or inventory management functions is 51% or more of their revenue for the relevant tax period. (structured commodity financing activity shall include prepayment, factoring, forfaiting, countertrade, warehouse receipt financing, export receivable financing, project finance, Islamic trade finance, and streaming financing)
Reinsurance Services and Insurance Activities	Earlier, Defined under Federal Law No. 6 of 2007.	However under recent updates, it has been now regulated under Federal Decree-Law No. 48 of 2023.
Distribution of Goods (Designated Zone)	Earlier, ‘Distribution of goods or materials in or from a Designated Zone’ applied only to customers who resell, process, or alter such goods or materials, or parts thereof, for the purposes of sale or resale.	Distribution of goods/materials in or from Designated Zones (DZs) will be treated as a qualifying activity, including when involving Public Benefit Entities (PBEs). For qualification, distribution should be either to customers who will resell the goods or to a PBE.
Publication and Application of this Decision	This decision shall come into retrospective effect on 1 June 2023.

List of Recognised Price Reporting Agencies

The list attached to Ministerial Decision No. 230 of 2025 on Determination of Recognised Price Reporting Agencies include the following:

S&P Global Commodity Insights (Platts & Fertecon)
Argus Media
ICIS (Independent Commodity Intelligence Services)
OPIS (Oil Price Information Service)
RIM Intelligence
CRU Group
Quantum Commodity Intelligence
Fastmarkets
General Index
ICE (Intercontinental Exchange)
MONTEL Spark Commodities
Expana

Free Zone businesses specially engaged in commodity trading should reassess their eligibility, as the new decisions take effect from 1st June 2023. To evaluate the impact on your business, we kindly request you to share the list of commodities traded, so we can determine whether they now qualify and enable you to benefit from the Corporate Tax @0%.

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FTA Decision 7 of 2025 – Audited SPFS for Tax Groups

Insights

August 12, 2025

Earlier this year, the Federal Tax Authority (FTA) issued Ministerial Decision No. 84 of 2025, mandating certain categories of taxable persons to prepare and maintain Special Purpose Audited Financial Statements for UAE Corporate Tax purposes.

Following this, the FTA has issued Decision No. 7 of 2025, offering clearer guidance for Tax Groups on preparing and maintaining these financial statements.

The decision outlines specific requirements for Audited Special Purpose Financial Statements (SPFS) for a Tax Group, where Aggregated Financial Statements must be prepared by combining the standalone financial statements of the Parent Company and each Subsidiary within the group

The FTA Decision 7 of 2025, states that:

Tax Groups must prepare special-purpose Aggregated Financial Statements.
These statements must be audited under a special purpose framework according to International Standards on Auditing (ISA).
Audited statements must be submitted to the Authority within 9 months after the Tax Period ends or such other date as determined by the Authority.

While preparing the aggregated Financial Statements of the Tax group, the taxable person should consider the following:

Aggregation is based on standalone Financial Statements, and the transactions between the members of the tax group must be eliminated.

Aggregated financial statements must be prepared annually based on the standalone Financial Statements of the members of the tax group for the relevant Financial Year.

Must comply with IFRS or IFRS for SMEs, with specific rules:
- If the member entity of tax group has acquired the entity, then it must exclude the effects of IFRS 3 business combinations and IFRS 10 consolidation.
- Adjustments for goodwill, bargain purchase gains, or fair value changes from consolidated statements must not be included in the aggregated financial statement.
- If a business combination occurs without acquiring a separate legal entity, the resultantassets, liabilities, goodwill, or bargain purchase gains in the acquiring company’s books must be fully included in the Aggregated Financial Statements.
- Aggregation must be done taking into consideration line-by-line items by the members of the tax group, including those relating to investments recorded by the Parent company or any subsidiary, or relating to corresponding equity recorded by the subsidiaries within the tax group, without any eliminations between these captions.
- Any impairment recorded by the Parent on its direct investment in a Subsidiary in the Tax group must not be eliminated.
- If a Subsidiary directly holds another Subsidiary in the Tax Group, any impairment recorded on that investment must not be eliminated.
Key principles:
- Eliminate all inter-tax group income, expenses, gains, losses, and transactions.
- Exclude standalone statements of entities outside the Tax Group.
- Do not eliminate transactions with outside entities.
- Standalone Financial Statements must follow IFRS (or IFRS for SMEs) using uniform accounting policies.
- Aggregate pre-tax profits or losses of the members of the tax group.
- Investments in entities outside the Tax Group must be carried at cost less impairment.
- Present aggregated financial statements in AED.

Audited SPFS for Tax Groups: Notes and Disclosures

Aggregated statements must include the aggregated statement of financial position, profit or loss, other comprehensive income, and changes in equity.
Disclosures must explain the preparation framework, aggregation basis, key accounting policies, estimates, judgments applied, and supporting notes.

Members Leaving the Tax Group:

Members leaving the Tax Group must use the Tax Group’s asset and liability values as opening values in their standalone Financial Statements.
If accounting standards don’t allow this, taxable income must still be calculated as if these values were used.

The new guidelines will apply to tax periods commencing on or after 1 January 2025.

FTA Decision 7 of 2025 - Audited SPFS for Tax Groups: Key Takeaways

Tax Groups now have a formal financial reporting obligation for the Corporate Tax compliance
The aggregated financial statement of the Tax group must be in AED.
Updated rules reinforce the importance of financial reporting compliance as part of the Corporate Tax framework in the UAE.

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Dubai Cassation Court Rules on VAT for Pre-2018 Construction Contracts: A Landmark Judgment for Long-Term Contracts

Insights

August 8, 2025

The Dubai Cassation Court has issued a landmark ruling in Case No. 685/2024, providing critical clarification on the application of Value Added Tax (VAT) to construction supplies and services performed prior to the implementation of VAT in the UAE on 1 January 2018. This decision has significant implications for contractors, developers, and other stakeholders involved in long-term construction projects that span the VAT implementation date.

The ruling confirms a fundamental principle of taxation: VAT cannot be applied retroactively to supplies delivered before the law came into effect, regardless of when the associated invoice was issued or payment received.

Legal and Regulatory Background

VAT in the UAE was introduced under Federal Decree-Law No. 8 of 2017, which came into force on 1st January 2018, along with the Executive Regulations (Cabinet Decision No. 52 of 2017). This legislative framework set out the mechanisms for identifying taxable supplies, VAT treatments and determining the date of supply.

There was considerable uncertainty in the construction sector regarding multi-phase, multi-year contracts during the transitional period following the introduction of VAT. Key questions arose about how VAT should be applied in the following scenarios:

Goods and services supplied before 2018, but invoiced after;
Contracts signed before the introduction of VAT that continued into 2018 and beyond;
Projects with lump-sum or milestone-based payments that overlapped the VAT threshold.

The Facts of the Case

The case before the Dubai Cassation Court involved a contractor who had entered into a construction agreement prior to 1 January 2018. Although portions of the work were completed and delivered before VAT was introduced, invoices for some of these supplies were issued only after the VAT law came into force.

The Federal Tax Authority (FTA) and the primary court initially held the position that VAT was payable on invoices issued after the implementation of VAT, regardless of when the actual supply occurred. As a result, contractors were held liable for VAT even though the goods or services had been supplied before the law came into effect.

The Ruling: Key Takeaways

The Dubai Cassation Court reversed the lower court’s decision, stating:

“VAT is not applicable to supplies of goods and services that were completed before 1 January 2018, irrespective of when the invoices were issued or payments received.”

The court cited the following critical provisions:

1. Article 25 –Date of Supply

This article outlines that the “date of supply” is generally the earliest of:

The date on which goods were transferred or services completed.
The date of invoice issuance.
The date of payment.

The court affirmed that, in cases where supply was demonstrably completed prior to 1 January 2018, that supply is deemed to fall outside the VAT regime.

2. Article 80 – Transitional Provisions

Article 80 emphasizes that VAT is only chargeable on the portion of supplies delivered after the implementation date, unless otherwise agreed contractually.

Substance Over Form: Legal Reasoning

The court adopted a “substance over form” interpretation, focusing on the actual performance and delivery of obligations, rather than the formal act of invoicing or payments.

This interpretation ensures that parties to long-term contracts are not unjustly penalized for administrative or procedural delays in invoicing or payment processing.

Implications for the Construction Sector

This decision carries significant implications for businesses in the UAE construction industry, as many continue to face unresolved transitional VAT assessments.

Pre-2018 Supplies are non-vatable

Any component of a project—whether labour, materials, or services—that was completed or delivered prior to 1 January 2018 is not subject to VAT, even if invoice issued or payment recei

Accurate Documentation Is Crucial

To rely on the VAT applicability, contractors must retain clear, dated documentation proving when supplies were completed. This includes:

Delivery notes
Site inspection reports
Work completion certificates
Progress reports

Impact on VAT Compliance and Refunds

Businesses that may have erroneously charged or paid VAT on pre-2018 supplies due to ambiguous billing practices or FTA assessments may now have grounds to:

File for VAT refunds with supporting documentation;
Challenge prior FTA audits or tax penalties;
Renegotiate or review historical contracts that span the VAT introduction date.

Conclusion

The Dubai Cassation Court’s ruling in Case No. 685/2024 sets an important precedent in the interpretation and application of VAT in the UAE, particularly during transitional periods. It provides a fair and pragmatic solution for the construction industry—a sector heavily impacted by long-term contractual obligations.

Furthermore, it is essential for contractors, developers, and legal advisors to align their contractual, accounting, and compliance practices with this interpretation. Maintaining proper documentation, ensuring clear communication with clients, and engaging in proactive tax planning are key to avoiding disputes and ensuring VAT compliance in the post-2018 UAE tax environment.

Summary of the Dubai Cassation Court VAT Ruling (Case No. 685/2024)

Background:
- UAE implemented 5% VAT on 1st January 2018.
- Many construction contracts started before VAT but continued after.

Issue:
- Should VAT apply to supplies completed before 1st Jan 2018, but invoiced or paid for after?

Court’s Ruling:
- NO VAT on goods/services supplied before 1st Jan 2018, even if:
  ▪ Invoices were issued later, or
  
  ▪ Payments were made after2018.
- The “date of supply” is based on actual delivery or performance, not invoice/payment date.

Legal Basis:
- NO VAT on goods/services supplied before 1st Jan 2018, even if:
  ▪ Invoices were issued later, or
  ▪ Payments were made after2018.
- The “date of supply” is based on actual delivery or performance, not invoice/payment date.

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VAT Refund for UAE Nationals Building New Residences

Insights

July 21, 2025

The UAE Federal Tax Authority (FTA) offers a VAT refund scheme to UAE nationals constructing new residences. This initiative aims to alleviate the financial burden of VAT on construction costs, promoting homeownership among Emiratis.

Meaning of ‘residence’ for VAT purposes

A ‘residence’ refers to any building—such as a townhouse or villa—mainly used as a private home by an individual. It must include basic living features like a kitchen, bathroom, sleeping areas, along with any fixtures or fittings that come with it.

Additions or separate buildings built later on the same plot are not considered part of the original residence for the New Residences Refund Scheme, unless they independently meet the definition of a residence (i.e., have their own kitchen, bathroom, and sleeping areas).

Examples

If a children play area is added later, the VAT on its construction cannot be reclaimed.
If a separate second house with full living facilities is built later, the VAT can be reclaimed—if all other conditions are met.
If a second floor with full living facilities is added to the existing home, the VAT on this cannot be reclaimed, even if all other conditions are met.

Exclusion for New Residences Refund Scheme

Properties registered for commercial use, like hotel apartments, do not qualify as ‘residences’ under this scheme.

Eligibility Criteria

The applicant must be a natural person who is a UAE national.
The applicant must hold a valid UAE Family Book.
The claim must relate to a newly constructed building.
The building must be intended for use solely as the residence of the applicant or the applicant’s family.
The building must not be used for any commercial or non-residential purposes (e.g. hotel, guest house, hospital, clinic).
Only one refund claim is permitted per new residence, except in cases involving retention payments.
Any additions or separate structures built on the same plot must independently qualify as a residence.

Eligible Expenses

Expenses must relate to a newly constructed building which is to be used solely as a residence of the applicant and / or his or her family. VAT on transport and clearing agent fees can be refunded if they are directly linked to building materials used to construct a private home for a UAE national or their family. The materials must be fixed to the building in a way that they can’t be removed easily without tools or causing damage. No refund is allowed for costs related to extra or separate structures unless they qualify as a full residence on their own.

A list of what expenses are covered and not covered is provided below:

Expense items eligible for refund

Services of builders
Services of architects
Services of engineers
Supervisory services
Other similar services necessary for the successful construction of the residence
Building materials that make up the fabric of the property (e.g. bricks, cements, tiles, timber)
Central air conditioning and split units Doors
Fencing permanently erected around the boundary of the dwelling
Fire alarms and smoke detectors
Flooring (excluding carpets)
Built-in kitchen, kitchen sinks, work surfaces and fitted cupboards
Sanitary units
Shower units
Window frames and glazing
Wiring when embedded inside the structure of the building

Expense items NOT eligible for refund

Furniture which is not affixed to the building such as sofas, tables, chairs, bedroom furniture, curtains, blinds, carpets
Electrical and gas appliances, including cookers
Landscaping, such as trees, grass and plants
Free-standing and integrated appliances such as fridges, freezers, dishwashers, microwaves, washing machines, dryers, coffee machines
Audio equipment (including remote controls), built-in speakers, intelligent lighting systems, satellite boxes, Freeview boxes, CCTV, telephones
Electrical components for garage doors and gates (including remote controls)
Garden furniture and ornaments and sheds
Swimming pools
Children play structures

Timeline for submitting the application

The refund application must be submitted to the FTA within 12 months from the date the newly built residence is completed which is the earlier of the date:

The residence is occupied, or
The residence is certified as completed by a competent authority (Building Completion Certificate).

The applicant must provide proof of the date the residence was occupied. In certain situations, like illness, military service, legal disputes, or pending construction work, the 12-month deadline can be extended. These events must be supported by official documents, and the FTA will decide if the reasons are acceptable. It should be noted that refurbishments or changes to previously completed work are not considered in this context.

Procedures, steps & required documents

To apply for the New Residence VAT Refund, applicant must submit their application through the FTA E-Services Portal. If they don’t have an account, they need to register first then proceed for refund application by following below mentioned steps:

Step 1

Where the FTA checks the application and may ask for original or extra documents. Only one refund request can be made per residence, unless it includes a retention payment, which allows for a second claim.

Step 2

If the application meets the basic conditions, it moves to next step, where it’s sent to a Verification authority within five working days. Applicant will be given a reference number and may need to submit more documents. The Verification authority will carefully review the expenses and VAT claims.

Request for Tax Refund for Building a New Residence

Procedures & steps:

Sign-up for an Emara tax account through the FTA’s website
Click on the “User Profile” screen
Select “Special Refunds”
Click on “New Residence VAT Refunds”
Click on “New Refund Request”
Fill in the form and submit the request.

Documents required

Copy of the applicant’s Emirates ID.
Copy of the applicant’s Family Book.
Copy of the property completion/occupancy certificate.
Copy of applicant’s property site plan
Documentary proof to support the ownership of the plot
Copy of the IBAN letter.
Any other documents requested at a later stage.

If the request is preliminarily approved by the FTA, the authority will e-mail the applicant requesting additional documents.

Additional Documents which may be requested by FTA

Copy of the construction contract (including addendums).
Copy of the consultancy contract (including addendums).
All tax invoices and proofs of payment (e.g. payment receipts or payment stamps) provided by the contractor & the consultant to the owner.
Any other documents requested at a later stage.

The Verification authority may request additional documentations, or original of documents, to complete verification procedures. Reviewing the documents and making payment might take up to 20 business days from the date all required documents have been submitted.

Retention payments

If a UAE national needs to make retention payments to contractors after the new residence is completed, this should be mentioned in the initial VAT refund application. Once the payment is made, a separate VAT refund claim can be submitted within 6 months of the payment date, along with proof of payment (e.g. a receipt).

Procedures & steps to request for Tax Refund for Retention Payments:

Login to Emara tax account through FTA website
Click on “New Residence VAT Refunds”
Click on “Request Retention”

Note: A claim may not be made in connection with a building that will not be used solely as a residence, for example as a hotel, guest house, hospital or for other similar purposes. Should the building be used for any purpose other than being the residence of a UAE National after receiving the special refund, the FTA will require the applicant to repay any VAT refunded to him as a result of breaching the above condition.

The FTA has launched the “Maskan” application in 2024 to simplify the VAT refund process for UAE nationals building new residences. This digital platform allows users to upload and link invoices, track refund status, and manage claims directly through the app. It reduces paperwork and speeds up the process. The app is available on iOS and Android and requires login via UAE Pass.

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