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The Federal Tax Authority (FTA) and Ministry of Finance have introduced several important procedural clarifications and regulatory updates during Q2 and Q3 2026. These developments have significant implications for taxpayers across the UAE, particularly in relation to transfer pricing, Small Business Relief, OECD BEPS Pillar Two implementation, and Free Zone compliance.
1. Transfer Pricing Downward Adjustment Disclosures
Taxpayers making post-tax year-end Transfer Pricing (TP) adjustments are subject to stricter procedural requirements under updated FTA guidance. While upward TP adjustments generally follow established procedures, downward adjustments that reduce taxable income require enhanced disclosure and supporting documentation.
Taxpayers seeking to claim a downward adjustment must provide sufficient evidence demonstrating that the adjustment is consistent with the arm’s length principle. The documentation should support that the corresponding foreign counterparty has made, or will make, a symmetrical upward adjustment.
Where the required disclosure and supporting evidence are not provided as part of the tax return filing process, the FTA may disallow the downward adjustment. Taxpayers should therefore ensure that their TP policies and intercompany agreements are aligned before filing their Corporate Tax returns
2. Extension of Small Business Relief (SBR) to 2029
In a major relief measure for startups and SMEs, the Ministry of Finance has officially extended Small Business Relief (SBR) through tax periods ending December 31, 2029. Eligible resident taxpayers with gross revenue below AED 3 million in current and prior tax periods can elect to be treated as having no taxable income. However, businesses must remain vigilant regarding revenue thresholds and artificial revenue splitting rules, as electees remain subject to record-keeping and corporate tax registration obligations.
3. Final QDMTT Registration Deadlines for Pillar Two
In alignment with OECD Base Erosion and Profit Shifting (BEPS) Pillar Two guidelines, the UAE has solidified registration and notification deadlines for the Qualified Domestic Minimum Top-up Tax (QDMTT). In-scope MNE groups with consolidated global revenues exceeding EUR 750 million must register for UAE QDMTT purposes with the FTA within seven months from the end of the first Fiscal Year in which they become subject to Top-up Tax. However, entities with a Fiscal Year ending before 30 April 2026 must submit their QDMTT registration application by 30 November 2026.
4. Free Zone Agreed-Upon Procedures (AUP) Reporting
For Qualifying Free Zone Persons (QFZPs), revised Annual Agreed-Upon Procedures (AUP) requirements apply to Tax Periods commencing on or after 1 January 2026. To maintain the 0% preferential Corporate Tax rate for QFZPs performing qualifying activity of ‘Distribution of goods and materials’, an independent auditor must prepare an AUP report in accordance with ISRS 4400, factually confirming compliance with the relevant qualifying conditions, including genuine reseller status on the customer side and genuine entry into the Designated Zone on the import side. The signed AUP report must be submitted electronically to the FTA within 30 days of the Corporate Tax return filing deadline. Failure to submit compliant AUP report may result in loss of QFZP status, with the entity’s entire taxable income becoming subject to the standard 9% Corporate Tax rate.
References
Reference/Citation
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• CT0011 | Downward adjustments made by a Taxable Person in the Tax Return to comply with the Corporate Tax Law.
• Ministerial Decision No. 131 of 2026 Amending Certain Provisions of Ministerial Decision No. 73 of 2023 on Small Business Relief for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
• FTA Decision No. 12 of 2026 on the requirements for Registration and Deregistration of Entities for the purposes of Cabinet Decision No. 142 of 2024 on the Imposition of Top-Up Tax on Multinational Enterprises.
• Federal Tax Authority Decision No. 6 of 2026 Determining the Additional Procedures for the Compliance of Qualifying Free Zone Persons Engaged in the Activity of Distribution of Goods or Materials in or from a Designated Zone for the Purposes of the Taxation of Corporations and Businesses.