2025 UAE Tax: VAT, Transfer Pricing & Compliance Updates

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This is the first tax digest for 2025. This issue summarizes the most significant revisions in UAE and international tax legislation that ended 2024 and sets the foundation for the coming year.


We’re also bringing a new addition to our digest: thematic highlights of the month. Each month, we will focus on a single tax-related topic, offering insights, expert analysis, and practical answers.

This month’s theme is Transfer Pricing (TP).

We will share our knowledge, important publications, and expert perspectives about TP compliance and its consequences for enterprises in the UAE and GCC

Overview of the tax updates mentioned in this issue:

  • VAT changes include new public clarifications on cryptocurrency mining and the expansion of the Reverse Charge Mechanism (RCM).
  • Tax processes include simplified rules for resolving errors and improvements to the whistleblower program for tax offenses.
  • International developments include progress on the double tax treaty negotiations with Russia and important updates on Pillar 2 implementation across the GCC.

Happy reading, and may the year 2025 bring you and your company development, success, and new opportunities!

Tax Updates

UAE VAT Update: FTA Issues Guidance on Cryptocurrency Mining. (VATP039)

  • The UAE FTA has clarified the VAT treatment for bitcoin mining.
  • Mining for personal use is not subject to VAT.
  • Mining for third parties is taxable at 5% if the client is in the UAE; non-resident clients may be eligible for 0% VAT under certain conditions.

Input VAT recovery varies depending on whether mining is for personal use or as a service to third parties.

UAE VAT Update: Reverse Charge Mechanism Extended to Precious Metals and Stones.

The UAE Ministry of Finance has published Cabinet Decision No. (127) of 2024, which replaces Cabinet Decision No. (25) of 2018, and broadens the scope of the Reverse Charge Mechanism (RCM) under VAT to include more transactions involving precious metals and stones.

Key updates:

The RCM currently applies to a broader range of precious metals (e.g., gold, silver, palladium, platinum) and stones (e.g., diamonds, pearls, rubies, sapphires, and emeralds), as well as jewelry made mostly of these materials.

Supplier obligations: VAT-registered suppliers no longer have to charge and pay VAT on qualified transactions when supplying VAT-registered enterprises.

Buyer obligations: If the items are used to resell, produce, or manufacture other commodities, VAT-registered buyers must self-account for VAT in their tax return.

Tax Procedures Update: New Mechanism for Correcting Errors on VAT Returns Introduced

On New Year’s Eve, the UAE FTA published Decision No. 8 of 2024, which takes effect on January 1, 2025. This ruling establishes a new option for taxpayers to remedy errors or omissions in VAT returns without affecting the tax owed.

Key highlights:

Taxpayers must use the Voluntary Disclosure (VD) process to correct errors or omissions, as long as the revisions do not result in a change to the owing tax.

Eligible cases (Article 2):

Incorrect emirate reporting involves reporting standard-rated supply under the incorrect emirate.

Misreporting of zero-rated supply.

Exempt supplies are not being reported correctly.

This ruling benefits taxpayers by simplifying compliance for errors that do not affect tax liabilities.

Tax Procedure Update: FTA Releases. Updated Raqeeb User Guide for Whistleblower Program

FTA has released an updated version of the Raqeeb User Guide (UAEGWB1), which replaces the April 2022 edition. This guidance complements the Whistleblower Programme for Tax Violations and Evasion, which seeks to improve compliance and enable secure, confidential reporting of tax irregularities involving excise tax, VAT, and corporate tax (CIT).

updates in the new Raqeeb user guide:

The Expanded Scope of Taxes incorporates recent legislative changes to excise tax, VAT, and CIT.

Simplified Submission Process: simplified forms with clearly defined evidentiary criteria.

The Common Errors Section might help you avoid traps such as inadequate details or inappropriate material.

Enhanced Informant Guidance: This covers eligibility requirements, confidentiality measures, and reward processing information.

Russia and United Arab Emirates Sign the New Double Tax Treaty

Representatives from Russia and the UAE signed a Double Tax Treaty (DTT), with the goal of completing all necessary procedures this year and enforcing the agreement beginning next year.

Key points:

The specific terms of the deal have yet to be announced.

According to Alexey Sazanov, Russia’s State Secretary and Deputy Minister of Finance, the pact creates a 10% tax rate on dividends, interest, and royalties. MinFin Reveals Key DTT Terms.

A more extensive examination of the pact and its ramifications can be found here (in Russian).

Pillar 2 Implementation: GCC Countries Launch Domestic Top-Up Tax

The UAE, Bahrain, Qatar, Kuwait, and Oman have implemented a 15% Domestic Top-Up Tax under the OECD’s Pillar 2 framework, which will take effect on January 1, 2025. This tax applies to multinational enterprises (MNEs) with yearly consolidated revenues of at least €750 million in at least two of the previous four fiscal years.

Key updates:

  • Oman issued Decree No. 70/2024 on December 31, 2024. Details.
  • Qatar’s Shura Council adopted tax law modifications on December 23, 2024. Details.
  • Kuwait enacted Law No. 157, which established the Domestic Top-Up Tax. Details.
  • Saudi Arabia has yet to declare plans to impose a Domestic Top-Up Tax under Pillar 2.

TRANSFER PRICE INSIGHTS

Transfer pricing (TP) is an important part of the UAE’s corporate tax regime

Members of multinational groups based in the UAE with global revenues greater than AED 3,150,000,000 and enterprises with local revenues greater than AED 200,000,000 must develop and submit TP paperwork.

Compliance with TP Articles is required for Free Zone Persons to qualify as Qualifying Free Zone Persons (QFZPs) and benefit from the 0% corporate tax rate.

Disclosure on the tax return

The TP disclosure form, which details Related Party and Connected Person transactions above certain levels, must be filed as part of the business tax return within 9 months of the tax period.

Disclosure thresholds:

A Related Party Transactions Schedule is necessary when the total transaction value exceeds AED 40 million. If the value of the transaction exceeds AED 4 million, disclosures must include information about products, services, intellectual property, interest, and other categories.

A Connected Persons Schedule is required if the total value of transactions with Connected Persons exceeds AED 500,000

Transfer pricing (TP) is an important part of the UAE’s corporate tax regime.

Members of multinational groups based in the UAE with global revenues greater than AED 3,150,000,000 and enterprises with local revenues greater than AED 200,000,000 must develop and submit TP paperwork.

Compliance with TP Articles is required for Free Zone Persons to qualify as Qualifying Free Zone Persons (QFZPs) and benefit from the 0% corporate tax rate.

Disclosure on the tax return

The TP disclosure form, which details Related Party and Connected Person transactions above certain levels, must be filed as part of the business tax return within 9 months of the tax period.

What needs to be done now?

Step 1: Identify transactions for TP documentation.

Examine transactions requiring TP documentation. Consult a tax advisor to determine which transactions are in conformity and whether there is a valid reason to exclude any.

Companies frequently overlook this phase, sometimes over-preparing documents. Our experience has shown that diligent analysis can sometimes remove some transactions from compliance, thereby saving resources.

Step 2: Conduct a TP Assessment.

Analyze the pricing for controlled transactions to see if they adhere to the arm’s length concept. If any differences are discovered, plan steps to mitigate risks before the disclosure date. Prepare to create additional price defense papers and work with a tax professional to assure compliance and assistance.

Step 3: Prepare for the 2025 Filing.

Identify transactions for inclusion in the Corporate Tax Return and confirm their accuracy during preparation. To avoid mistakes, validate details with a tax consultant.

Step 4: Prepare TP documentation or appropriate records on pricing.

Currently, the Corporate Tax Return does not support the automated attachment of Local and Master files. However, these files must be prepared, maintained, and kept for 7 years following the end of the tax period. The FTA may request them, in which case they must be submitted within 30 days.

Step 5: Ensure Ongoing Compliance for Free Zone Residents:

Constantly monitor all restricted transactions. Free Zone Residents who want to keep the 0% tax rate must ensure that all transactions with Related Parties are priced at arm’s length.

Unicorn Global Solutions provides expert guidance on 2025 UAE Tax updates, including VAT compliance, transfer pricing, and global tax regulations. We simplify tax registration, filing, and documentation while staying updated on the latest requirements. Let us help you navigate these changes efficiently and ensure your business remains compliant.

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