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May2026 Newsletter

June 11, 2026

1.UAE Corporate Tax: Transfer Pricing and Free Zone Compliance Expectations

Overview

implementation of UAE Corporate Tax under Federal Decree-Law No. 47 of 2022 became effective for financial years beginning on or after 1 June 2023, the Federal Tax Authority continued to expand its compliance and audit focus in relation to transfer pricing documentation and Free Zone persons.

Free Zone entities that assumed their 0% Qualifying Free Zone Person (QFZP) status rendered them exempt from documentation obligations are now operating in an increasingly documentation-driven
compliance environment.

In 2026, FTA compliance checks on QFZP status have reportedly become more structured, with increased emphasis on supporting documentation and substance analysis

Free Zone entities must demonstrate adequate substance in the UAE, derive qualifying income (primarily from other Free Zone entities or overseas clients) and comply with transfer pricing requirements under Article 34 of the Corporate Tax Law, including the arm’s length principle on all related-party transactions. The Transfer Pricing Disclosure Form must accompany annual corporate tax returns where aggregate related-party transactions exceed the relevant threshold prescribed under the Corporate Tax reporting framework.

Risk-based audits are now increasingly focused on entities claiming preferential Free Zone tax treatment without sufficient supporting documentation or substance evidence. The FTA has also continued to issue guidance and public clarifications on substance requirements and qualifying income principles.

Conclusion

Free Zone entities transacting with mainland affiliates are particularly exposed. Failure to maintain proper transfer pricing documentation can result in loss of QFZP status for the relevant period and exposure to the 9% corporate tax rate on all income. IFRS-audited financial statements remain mandatory for QFZP claimants.

Key Takeaways:

  • QFZP status does not exempt Free Zone entities from transfer pricing documentation obligations
  • The FTA is conducting risk-based audits targeting exemption claims unsupported by adequate records
  • The Transfer Pricing Disclosure Form is required where aggregate related-party transactions exceed AED 40 million.
  • Small Business Relief (0% taxable income election) expires for periods ending after 31 December 2026

UAE E-Invoicing Framework;
Implementation Phase Begins

Overview

The UAE Ministry of Finance issued the Electronic Invoicing Guidelines (Version 1.0) in February 2026, marking a decisive shift from legislative design to operational execution. The guidelines establish the complete technical and regulatory framework for a mandatory nationwide e-invoicing system, a central pillar of the UAE’s digital tax transformation under the ‘We the UAE 2031’ vision. The framework is generally understood to apply in phases, with VAT-registered businesses expected to be prioritised in initial implementation stages, and broader categories to follow subject to official rollout sequencing.

Invoices are expected to include structured VAT data in AED, with technical specifications to be confirmed in final implementation regulations. A pilot programme by invitation is scheduled to launch on 1 July 2026, with phased mandatory go-live dates beginning 1 January 2027 for businesses with annual revenue of AED 50 million or more. In May 2026 the Ministry extended the deadline for large businesses to appoint an ASP from 31 July to 30 October 2026, while keeping the 1 January 2027 go-live date unchanged.

Conclusion

This is not purely a tax or IT exercise: it is a full finance transformation programme. Businesses must assess scope, select an ASP, align ERP systems to PINT-AE output, register on EmaraTax, and ensure operational readiness ahead of the pilot. Non-compliance attracts penalties under Cabinet Decision No. 106 of 2025.

Key Takeaways:

  • E-invoicing applies to all UAEconducting businesses regardless of AT status, including Free Zone entities
  • Mandatory go-live: 1 January 2027 for AED 50M+ revenue businesses; smaller entities follow in later phases
  • ASP appointment deadline extended to 30 October 2026 for large businesses
  • All invoices must use structured PINT-AE XML format; PDF invoices will not satisfy requirements at golive

ADGM FSRA Finalises Enhanced AML
Compliance Framework

Overview

The Financial Services Regulatory Authority of Abu Dhabi Global Market has concluded a comprehensive review and update of its AML, counter-terrorist financing, counter-proliferation financing, and sanctions compliance framework, following a formal industry consultation under Consultation Paper No. 1 of 2026.

The FSRA finalised amendments to both the Financial Services and Markets Regulations 2015 and the Anti-Money Laundering and Sanctions Rulebook on 21 May 2026. The revisions align the ADGM framework with federal legislation, including Federal Decree-Law No. 10 of 2025, and with the latest FATF recommendations. Notably, the amendments clarify that the FATF Travel Rule applies to virtual assets, requiring VASPs to share transaction data across borders. Industry participants broadly confirmed that the changes have minimal impact on existing compliance obligations, a view consistent with the FSRA’s own assessment, but the amendments nonetheless require policy, procedure, and training updates across all regulated entities.

Conclusion

All ADGM-regulated firms, including authorised financial services firms and DNFBPs, must review the updated AML Rulebook and implement any necessary changes. VASPs in particular must ensure Travel Rule compliance is operationally embedded, not merely documented

Key Takeaways:

  • ADGM FSRA’s updated AML framework effective 21 May 2026, following Consultation Paper No. 1 of 2026
  • Travel Rule for virtual assets explicitly clarified in the revised AML Rulebook
  • Changes align ADGM with Federal Decree-Law No. 10 of 2025 and updated FATF standards
  • Industry feedback confirmed minimal impact on existing obligations, but formal policy updates are still required

Banking and Financial

UAE Cheque Reforms: The Continuing Importance of Returned Cheques in Commercial Transactions

Overview

Although the legislative reforms decriminalising cheques returned for insufficient funds were enacted in 2022, their practical implications continue to generate commentary and require attention from businesses engaged in UAE commercial transactions. The reforms remain a live compliance consideration as enforcement patterns under the revised framework continue to develop.

Background

The changes form part of the UAE’s broader effort to modernise its commercial framework, promote business confidence, and facilitate more efficient debt recovery. Historically, a returned cheque could result in criminal proceedings against the issuer. The amendments to the UAE Commercial Transactions Law shifted emphasis away from criminal sanction, strengthening civil enforcement remedies instead. Under the current framework, a returned cheque may, in certain circumstances, be treated as an executive instrument, allowing creditors to pursue enforcement measures

Conclusion

The shift from criminal prosecution to expedited civil enforcement has changed, and not reduced, the legal significance of cheques in UAE commercial practice. The framework continues to provide strong protections for creditors while reserving criminal sanctions for fraudulent conduct. Businesses should maintain adequate controls over payment obligations and treat issued cheques with the same legal rigour as before the reforms.

Key Takeaways:

  • Cheques returned solely due to insufficient funds are no longer treated as criminal offences
  • Returned cheques may be directly enforceable through execution courts without a prior court judgment.
  • Criminal liability remains for fraudulent conduct and deliberate attempts to avoid payment.
  • Businesses should continue to exercise caution when issuing cheques and maintain adequate controls over payment obligations.

CRYPTO AND VIRTUAL ASSETS

Dubai Courts Clarify Force Majeure Limits in Crypto Investment Disputes

Overview

Geopolitical turbulence in early 2026 triggered significant crypto market volatility and gave rise to a new class of disputes: investment managers and OTC brokers seeking to invoke force majeure to excuse their failure to return investor funds following market downturns.

A Dubai Court of Appeal judgment (Case No. 406 of 2023, recently analysed in light of 2026 market conditions) provides the established framework for how UAE courts approach these claims. The court held that where a party had made informal guarantees to an investor, even via WhatsApp, those communications displaced any general force majeure defence. Market volatility caused by geopolitical events does not automatically
constitute force majeure in the digital assets sector. UAE courts prioritise the specific substance of the parties’ communications over broad macroeconomic arguments. Hadef & Partners has further noted that an informal guarantee can override even an otherwise legitimate force majeure argument.

Conclusion

Asset managers, OTC desks, and crypto investment platforms must treat all crisisperiod investor communications with legal care. WhatsApp messages, emails, and informal assurances can constitute binding representations that courts will enforce, and that defeat force majeure claims.

Key Takeaways:

  • UAE courts apply a rigorous, communication-specific test for force majeure: geopolitical volatility alone is insufficient
  • Informal assurances to investors, including WhatsApp messages, can constitute binding guarantees that override force majeure
  • Crypto asset managers must document their communications with investors carefully during market stress events
  • Both force majeure and ‘exceptional circumstances’ doctrines are available under UAE law; firms should assess which applies to their circumstances

EMPLOYMENT AND LABOUR

UAE Wage Protection System Overhauled: Unified Payday and Raised Compliance Threshold

Overview: Effective 1 June 2026

The UAE Ministry of Human Resources and Emiratisation issued Ministerial Resolution No. 340 of 2026, introducing a substantially revised framework for wage payment compliance in the private sector. Effective 1 June 2026, it repeals Ministerial Resolution No. 598 of 2022 and represents the most significant reform to the Wage Protection System in recent years.

The central change is a unified, nonnegotiable payday: salaries for the preceding month are due on the first day of every calendar month. Any payment received after this date is formally characterised as a delay,
regardless of bank processing times or internal payroll cycles. The WPS compliance threshold has been raised from 80% to 85% of total wages due. Enforcement is accelerated: MOHRE monitoring begins from day two of a missed payment, with escalating consequences including labour disputes, fines, work permit blocks, and potential travel bans for persistent non-compliance. Employers may use approved third-party payroll providers, but legal responsibility remains entirely with the employer. Supporting documentation evidencing payment must be maintained and made available to MOHRE on request.

Conclusion

Multinational organisations with centralised or cross-border payroll operations face particular risk given the inflexibility of the new deadline. Payroll calendars, bank processing dependencies, and internal approval chains must be reviewed against the 1 June 2026 effective date as a matter of urgency.

Key Takeaways:

  • Unified payday: all private sector salaries due on the 1st of every month from 1 June 2026
  • WPS compliance threshold raised from 80% to 85% of total wages
  • Enforcement begins day 2 of delay; consequences escalate to work permit blocks and travel bans
  • Outsourcing payroll to a third-party provider does not reduce employer liability

CROSS BORDER INVESTMENTS

UAE Merger Control Framework Now Fully Operational: Cabinet Decision No. 59 of 2026

Overview

After nearly three years of uncertainty since Federal Decree-Law No. 36 of 2023 introduced a mandatory, suspensory merger control framework, the UAE has adopted the Executive Regulations that give the regime
full operational effect. Cabinet Decision No. 59 of 2026, issued on 8 May 2026, is expected to enter into force in July 2026 and replaces the largely dormant 2014 implementing rules.

The filing obligation is triggered where either of two thresholds is met: combined UAE market turnover exceeds AED 300 million in the last fiscal year, or combined market share exceeds 40%. Filings are mandatory and
suspensory: transactions may not close before clearance. In acquisitions, the acquiring party bears the filing obligation; in mergers and joint ventures, all parties share the duty. The Competition Department has
10 business days to assess completeness (extendable by 10 days), after which a 90-day substantive review begins (extendable by 45 days). Confidentiality protections and thirdparty participation rights are now formalised. The regulations also confirm that the Competition Department may investigate transactions that met the thresholds but were not filed, whether before or after closing. Behavioural antitrust enforcement is
strengthened, with new guidance on dominance assessments, below-cost pricing prohibitions, and complaint procedures.

Conclusion

Every UAE M&A transaction with a UAE nexus must now undergo a mandatory competition analysis at the outset. Sale and purchase agreements and deal timetables must accommodate the notification and review period. Parties should structure information flows carefully to separate commercially sensitive content from disclosable material. Non-filing is no longer a low-risk option.

Key Takeaways:

  • Mandatory filing is triggered at AED 300 million combined UAE turnover or 40% combined market share
  • Filing is suspensory: transactions cannot close without Ministry of Economy clearance
  • The review period is 90 days, extendable by 45 days; deal timelines must build in this window from the outset
  • The Competition Department may investigate unfiled transactions that met the thresholds, even postclosing

DISPUTE RESOLUTION

Dubai Court of Appeal Reinforces Protection of Reputation in the Digital Environment

Overview

A recent judgment of the Dubai Court of Appeal demonstrates the courts’ increasing willingness to award substantial compensation where online conduct causes reputational harm, privacy violations, and
demonstrable financial loss.

Background

The dispute arose from a social media post in which the defendant shared the claimant’s personal photograph alongside identifying information, including name, address, and contact details, coupled with allegations of financial misconduct and a call for members of the public to contact him directly. The claimant, a UAE-based real estate investor, alleged significant harm to his personal and professional reputation, and the loss of business opportunities and client relationships as a result. Before the civil proceedings were commenced, the criminal courts found the defendant guilty of misusing information technology networks to violate the claimant’s privacy and publicly insult him. That conviction was upheld on appeal and became final.

Claim and Appeal

In subsequent civil proceedings seeking compensation for material and moral damages, the Court of First Instance awarded AED 100,000. The claimant appealed, arguing the award did not adequately reflect the scale of reputational and financial harm. Documentary evidence, including communications from affected clients, established a direct link between the online publication and the withdrawal of prospective clients from real estate transactions. The Court of Appeal, applying Article 293(1) of the UAE Civil Transactions Law, increased the award to AED 250,000 together with 5% legal interest, and rejected the defendant’s cross-appeal seeking dismissal. The judgment is enforceable.

Conclusion

This decision reinforces that freedom of expression does not extend to unlawful attacks on reputation or privacy, and confirms the courts’ willingness to award meaningful compensation where online misconduct causes tangible commercial harm. The growing importance of digital evidence in UAE litigation is also underscored preservation of screenshots,
correspondence, and financial impact records is essential.

Key Takeaways:

  • Online publications, including posts made through social media platforms, may give rise to both criminal and civil liability.
  • The unauthorised disclosure of personal information may constitute a privacy violation in addition to defamation.
  • Reputational damage can attract substantial compensation where evidence demonstrates a measurable impact on business relationships or commercial opportunities.
  • Organisations should maintain clear policies governing employee use of social media and the handling of personal information.
  • Individuals affected by defamatory content should preserve evidence promptly, including screenshots, correspondence, and records of any resulting financial losses.

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