Author: Mahesh Maddu

Unused UAE VAT credits from 2018 to 2021 may permanently expire after 31 December 2026 under new UAE VAT law amendments. Businesses carrying forward excess input VAT balances must review their EmaraTax records, file VAT refund claims, or offset credits against liabilities before the applicable deadlines to avoid irreversible loss of recoverable tax.

The UAE is strengthening its position as a global innovation hub through the new UAE R&D Tax Credits framework under the Corporate Tax regime. Eligible businesses may claim tax credits of 30 to 50 percent on qualifying research and development expenditure, alongside full deductibility of R&D costs.
In addition, qualifying Intellectual Property income such as patent royalties and copyrighted software may benefit from a 0 percent Corporate Tax rate under the UAE patent box regime. Together, these incentives significantly reduce the cost of innovation and encourage businesses to conduct genuine R&D activities within the UAE.

The UAE anti abuse rule under Article 50 of the UAE Corporate Tax Law gives the Federal Tax Authority (FTA) broad powers to challenge artificial tax arrangements that lack genuine commercial substance. As UAE corporate tax enforcement intensifies in 2026, the General Anti-Abuse Rule (GAAR) is becoming a major focus area during FTA audits and tax reviews.
The rule targets arrangements designed mainly to obtain a tax advantage, including artificial business splitting, intercompany profit shifting, and structures created only to access corporate tax reliefs or exemptions. Businesses operating in the UAE should now ensure that every part of their structure has clear commercial rationale, genuine economic activity, and proper documentation.

A UAE FTA voluntary disclosure allows businesses to correct tax errors before the Federal Tax Authority discovers them during an audit. In 2026, voluntary disclosure has become far more important due to rising FTA inspections, active Corporate Tax audits, and the revised penalty rules introduced under Cabinet Decision No. 129 of 2025.
Businesses that identify and correct mistakes early can often reduce penalties, limit interest exposure, and improve their audit position. Once the FTA issues an audit notification for a specific tax period, the opportunity for lower-cost correction may no longer be available.