UAE's Tax Ecosystem Enters A More Mature Compliance Phase In 2026: Report

Tax is now a day-to-day governance and data issue in the UAE, not a year-end filing exercise, and that 2026 will intensify this shift as audits deepen, cross-tax consistency becomes easier to test, and digitisation accelerates through e-invoicing, a report showed.

Dhruva, a premier tax advisory firm with expertise across the Middle East, India, and Asia, released its“UAE Year in Review 2025” report. The report highlights how 2025 marked the UAE's transition from policy introduction to tax operating models in practice, with corporate tax, transfer pricing and VAT moving firmly into execution. This analysis and outlook are based on this report, which tracks key legislative changes, administrative guidance, and market learnings from the year.

For corporate tax, 2025 established the cadence and governance behaviours that will shape the next cycle. That first cycle surfaced recurring operational pressure points. In 2026, Dhruva expects the focus to shift from first-time readiness to repeatability, including stronger quarterly provisioning discipline, clearer ownership of elections and positions, and audit-ready files that link commercial decisions to tax outcomes.

“This year, leadership teams will be measured on whether the organisation can run Corporate Tax as an operating model, with decisions taken early, positions documented properly, and governance that stands up under scrutiny,” commented Nimish Goel, Leader, Middle East, Dhruva.

Transfer pricing also moved materially in 2025 from awareness to implementation. Dhruva said the UAE and wider Gulf are entering a more mature enforcement environment where substance, commercial rationale and consistent evidence trails matter as much as benchmarking. For multinationals, 2025 developments reinforced that transfer pricing cannot be siloed, it increasingly interacts with global minimum tax considerations and effective tax rate management, making alignment between transfer pricing narratives and group reporting a strategic necessity. Dhruva expects 2026 to bring more structured reviews and information requests, with greater focus on actual conduct versus agreements, requiring businesses to maintain documentation as a living record through the year, supported by enterprise resource planning trails, approvals, and defensible governance.

“In transfer pricing, 2026 will reward organisations that can evidence what they do, not just what their intercompany agreements say,” Nimish added.“Authorities are getting better at connecting the dots across contracts, operational reality and reported results. If your narrative, numbers, and conduct are not aligned, that gap becomes the risk.”

On VAT, Dhruva said 2025 underscored how the UAE VAT regime is becoming more sophisticated through evolving audit practices and targeted reforms. The firm highlighted that decree-law changes effective 1 January 2026 sharpen procedural expectations and increase the cost of weak documentation and inconsistent VAT positions, particularly where input tax recovery and invoice compliance are not supported by complete evidence. Dhruva expects 2026 VAT risk to concentrate in areas where businesses often rely on assumptions instead of facts: input tax recoverability, invoice discipline, and cross-border and mixed-supply fact patterns that require tighter substantiation.

“VAT risk in 2026 is less about knowing the rules and more about proving the facts,” said Nimish.“Invoice discipline, defensible input tax positions, and the ability to respond quickly with complete, consistent documentation will matter more than ever.”

Dhruva added that e-invoicing is now the most material future-facing shift for VAT operating models and will become a board-level transformation agenda in 2026. The rollout begins with a voluntary phase from 1 July 2026, with mandatory adoption phased from 2027, starting with larger taxpayers. Dhruva noted that the new e-invoicing and reporting model requires more than 50 mandatory invoice data fields, with additional conditional fields depending on transaction type. With more than 650,000 VAT-registered businesses in the UAE and a large portion of the market expected to transition over phased waves, 2026 is the practical runway to clean master data, redesign invoicing workflows, and establish governance across tax, finance, procurement and information technology.

“The mistake organisations make is to treat e-invoicing as a software upgrade,” added Nimish.“It is a switch toward transaction-level validation and always-on compliance, where weak master data and inconsistent workflows can turn into billing disruption, cash-flow friction and avoidable disputes. 2026 has to be treated as a readiness year.”

Beyond Corporate Tax, transfer pricing and VAT, Dhruva said 2025 also brought meaningful developments in adjacent areas that leadership teams should factor into 2026 risk agendas. Customs is increasingly being treated as a strategic variable rather than a border transaction, as the UAE moves toward a more data-driven customs environment. This includes the transition to a 12-digit integrated customs tariff, expanding tariff lines from approximately 7,800 to over 13,400, and enhanced pre-loading advance cargo information requirements for air freight from April 2025, increasing the premium on accurate classification and shipment data.

“2025 was the year tax became operational in the UAE. In 2026, the organisations that perform best will be those that invest in governance, data quality and internal capability, because audits are becoming more sophisticated, cross-tax inconsistencies are easier to detect, and e-invoicing will shift compliance from periodic reporting to real-time control. The practical message for leadership teams is to move early, document properly, and build operating models that are defensible,” concluded Nimish.

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