FTA Tax Alert on Advance Pricing Agreements

From Compliance to Confidence: Why 2026 Is a Turning Point for Tax Governance in the UAE?

As multinational groups and regional champions expand their UAE footprint, tax is no longer a back-office function, it is a board-level governance issue, with the first full cycle of UAE Corporate Tax completed, the rollout of Pillar Two Domestic Minimum Top-Up Tax (DMTT), and the formal launch of the Advance Pricing Agreement (APA) framework, 2026 marks a decisive shift from “first-time compliance” to long-term tax strategy and operational readiness.

For CFOs, tax directors, and investors, the question is no longer what applies, but how to embed certainty, substance, and predictability into daily operations.

Key Developments Shaping the UAE Tax Landscape

Based on recent regulatory updates and market experience, several themes now define the operating environment:

Corporate Tax: Lessons from the First Filing Cycle

The inaugural filing season highlighted that compliance is highly data-driven and coordination-intensive, businesses that performed better had:

• Early financial statement finalization and audit readiness

• Clear internal ownership of tax data flows

• Ongoing reconciliation between accounting and tax positions

Transfer pricing (TP) emerged as a critical pressure point, particularly around common-control transactions, inter-company balances, and informal group arrangements that now require arm’s-length support and documentation.

✔️ Transfer Pricing: From Documentation to Behavioral Scrutiny

Regulatory focus is shifting toward how decisions are actually made within groups, not only what contracts say, authorities are increasingly testing:

• Whether key management personnel (KMP) truly control risks

• Whether profit allocation aligns with real operational substance

• Whether treasury and financing structures reflect commercial reality

This signals a move toward substance-based audits supported by transaction-level data and operational evidence.

✔️ Pillar Two & Domestic Minimum Top-Up Tax (DMTT)

For groups within scope (EUR 750m+), DMTT introduces a parallel tax computation regime based on Globe rules, not domestic Corporate Tax rules. Key implications include:

• Joint ventures may be fully pulled into UAE DMTT calculations even when minority partners are outside Pillar Two

• Free Zone incentives may be neutralized at the group ETR level

• Deferred tax accounting becomes a central driver of effective tax rate outcomes

This elevates the importance of tax-finance integration and forward-looking modeling.

✔️Free Zones: Still Competitive, But More Nuanced

Recent ministerial decisions expanded qualifying activities, especially in commodity trading, structured trade finance, and own-account treasury operations, while reinforcing substance and revenue-mix thresholds.

At the same time, Pillar Two reduces the global tax advantage of 0% regimes for large groups, pushing businesses to reassess whether Free Zone structures remain optimal under a minimum-tax environment.

Advance Pricing Agreements (APA): Formal Tax Certainty Arrives

The Federal Tax Authority has launched the APA framework under the Corporate Tax regime, initially through Unilateral APAs (UAPAs):

• Domestic UAPA applications accepted from December 2025

• Cross-border UAPA timelines to be announced in 2026

• Coverage: minimum 3 years, maximum 5 years, prospective only

• Filing fee: AED 30,000 (renewal: AED 15,000)

• Materiality threshold: typically AED 100 million in controlled transactions per year (indicative, not absolute)

APAs are designed to reduce audit risk, improve predictability, and mitigate double taxation exposure, particularly valuable for groups with complex pricing models or high-value intragroup flows.

What This Means for Businesses and Investors?

For decision-makers in the UAE market, these developments translate into practical priorities:

• Tax governance is now part of enterprise risk management.

• Board oversight of transfer pricing, treasury structures, and KMP functions is becoming standard practice.

• Systems and data matter as much as legal structure.

• ERP traceability, inter-company reconciliations, and documentation workflows are increasingly tested during audits.

• Joint ventures require renewed tax risk allocation.

• Shareholder agreements and tax-sharing clauses may need updates in light of DMTT exposure.

• APAs are emerging as strategic tools, not just compliance mechanisms.

For stable, recurring transactions, locking in pricing methodologies can support investment planning and dispute avoidance.

Looking Ahead: From Filing to Framework Design

The UAE is clearly aligning with global tax governance standards while maintaining its role as a regional investment hub, the next phase is not about introducing new taxes, but about how effectively businesses operationalize them:

• Tax strategy is becoming inseparable from operational strategy, treasury design, and corporate governance.

• Groups that treat tax as an integrated business function, rather than a year-end reporting exercise, will be better positioned to manage audits, cross-border expansion, and investor scrutiny.

Kozman & Co. | SBC Global Perspective

At Kozman & Co. | SBC Global , we view these reforms as a signal that the UAE market is entering a phase of mature tax regulation combined with high commercial opportunity.

• Supporting clients now requires not only technical interpretation, but also:

• Alignment between legal, tax, finance, and operations

• Forward-looking modeling under multiple regulatory regimes

• Structuring that balances efficiency with defensibility

Our role is to help businesses translate regulatory frameworks into workable operating models that support growth, investment, and long-term certainty.

Let’s Continue the Conversation

• How are organizations adjusting their transfer pricing and tax governance frameworks in light of DMTT and increasing audit sophistication?

• What practical challenges are CEOs and tax teams facing in aligning systems, contracts, and documentation?

We welcome your perspectives in the comments and invite professionals across the UAE market to share insights and experiences.