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Profit Margin Scheme under UAE VAT – A Guide for Resellers | RVG

Charging VAT on second-hand goods, antiques, collector’s items, or Article 53 goods at full selling price can create tax cascading, where VAT is effectively applied multiple times. To address this, the Federal Tax Authority (FTA) introduced the Profit Margin Scheme, a special optional VAT mechanism that allows resellers to pay VAT only on their profit margin, rather than the full selling price.

Who Can Apply?

The scheme applies to resellers dealing with:

Second-hand goods (e.g., used cars, electronics, furniture)

Antiques (goods older than 50 years)

Collector’s items (stamps, coins, rare objects)

Article 53 goods, where input VAT recovery is blocked

Key Highlights

VAT is calculated on the profit margin: VAT=ProfitMargin÷21VAT = Profit Margin ÷ 21VAT=ProfitMargin÷21

Losses or break-even sales are VAT-free

Optional application for each eligible supply

Requires proper invoicing: invoice must state “VAT charged under the Profit Margin Scheme” without showing VAT separately

Prescribed record-keeping must be maintained

Must be reported correctly in the VAT Return (VAT201)

Why It Matters

The Profit Margin Scheme aligns VAT with actual economic value addition, prevents cascading, and reduces unnecessary tax for resellers. It provides a fair, practical, and compliant method for calculating VAT on eligible goods.

Advance Pricing Agreements (APA) under UAE Corporate Tax | RVG

With the introduction of Corporate Tax in the UAE, transfer pricing has become a critical compliance area for businesses engaging in related-party transactions. To bring certainty and reduce future disputes, the UAE has introduced the Advance Pricing Agreement (APA) programme, aligned with international best practices.

An Advance Pricing Agreement is a formal arrangement between a taxpayer and the Federal Tax Authority (FTA) that pre-determines the arm’s length pricing methodology for controlled transactions over a defined period. This helps businesses manage tax risk proactively and avoid prolonged litigation.

Types of APAs in the UAE

The UAE has currently introduced Unilateral APAs (UAPAs), where the agreement is between the taxpayer and the FTA. These will apply to:

Domestic controlled transactions (applications from December 2025)

Cross-border controlled transactions (expected from 2026)

Bilateral and Multilateral APAs, involving foreign tax authorities through Mutual Agreement Procedures, will be introduced at a later stage.

Key Features of the APA Programme

Covers specific controlled transactions and pricing methodologies

Valid for 3 to 5 tax periods

Subject to a materiality threshold of AED 100 million (with possible exceptions)

Requires defined critical assumptions and ongoing compliance

Involves a structured process: pre-filing consultation, evaluation, negotiation, and agreement

Once concluded, an APA is legally binding, provided the agreed terms and assumptions are consistently followed.

Why APAs Matter

For businesses with significant related-party transactions, an APA is more than a compliance requirement—it is a strategic safeguard that offers pricing certainty, reduces audit exposure, and supports smoother tax administration.

FTA Decision No. 10 of 2025: Standardised Sugar Calculation for Sweetened Drink Concentrates | RVG

As regulation of sweetened drinks continues to evolve under the UAE Excise Tax regime, the Federal Tax Authority (FTA) has issued Decision No. 10 of 2025, introducing a standardised mechanism for calculating the percentage of sugar and other sweeteners in certain concentrated products. The Decision will take effect from 1 January 2026.

Scope of the Decision

The Decision applies to concentrates, powders, gels, and extracts that can be converted into sweetened drinks, specifically where no reliable guidelines exist or where existing guidance on sugar content has proven inaccurate. Its primary objective is to ensure correct excise tax classification based on actual sugar and sweetener content.

Standard Calculation Mechanism

To determine the applicable excise tax category, taxable persons must obtain a laboratory report from an accredited laboratory specifying the total quantity of sugar and other sweeteners per unit of the concentrated product. Based on this data, the final drink volume is calculated using a standard formula prescribed by the FTA, followed by determination of the dilution ratio. This approach ensures consistency and transparency in excise tax assessments.

Key Exclusions

The mechanism does not apply to:

Liquid concentrates containing less than 5 grams of sugar per 100 ml, which fall under the Low-Sugar Category; or

Products containing only artificial sweeteners, as confirmed by laboratory analysis.

What Businesses Should Consider

FTA Decision No. 10 of 2025 provides much-needed clarity for businesses dealing in sweetened drink concentrates. Companies should review product formulations, laboratory testing procedures, and internal compliance systems well before 1 January 2026 to avoid misclassification and potential penalties.

For expert guidance on excise tax compliance and product classification, RVG is well-positioned to support businesses in navigating the upcoming changes. 

UAE Cabinet Decision No. 197 of 2025: A New Framework for Excise Goods and Tax Calculation | RVG

The UAE has taken another significant step toward strengthening its indirect tax framework with the introduction of Cabinet Decision No. 197 of 2025. This decision establishes a clearer and more structured approach to the classification of excise goods and the calculation of excise tax, reinforcing transparency and regulatory certainty for businesses.

Under the new framework, the decision provides detailed guidance on how excise goods should be identified and valued for tax purposes. By standardizing valuation methods and tax calculation mechanisms, the UAE aims to reduce inconsistencies and disputes while ensuring uniform compliance across industries dealing with excise-taxable products.

For manufacturers, importers, and distributors, this update emphasizes the importance of accurate product classification, correct tax base determination, and robust documentation. Businesses that fail to align with the revised rules may face increased compliance risks, including penalties and reassessments by the Federal Tax Authority (FTA).

As excise tax regulations continue to evolve, proactive compliance has become more critical than ever. Reviewing internal tax processes, updating pricing and reporting structures, and seeking professional guidance can help businesses stay aligned with the new requirements and avoid unnecessary exposure.

To understand the key highlights and practical implications of Cabinet Decision No. 197 of 2025, read the full article here:

FTA Decision No. 8 of 2025: New Compliance Timelines for Qualifying Investment Funds & Investors | RVG

The Federal Tax Authority (FTA) has issued Decision No. 8 of 2025, introducing new compliance timelines for Qualifying Investment Funds (QIFs) and their investors under the UAE Corporate Tax regime. This update aims to bring greater clarity, consistency, and accountability to fund-related tax compliance.

What’s New in This Decision?

The decision outlines specific timelines and conditions that QIFs and investors must meet to maintain their qualifying status and related tax benefits. Compliance with these timelines is now a critical requirement.

Key Takeaways

Clear deadlines are introduced for confirming Qualifying Investment Fund status

Investors’ tax treatment is closely linked to the fund’s compliance

Delays or incorrect submissions may impact tax exemptions and benefits

Stronger reporting and documentation standards are emphasized

Why This Matters

Missing compliance timelines can lead to the loss of preferential tax treatment, increased scrutiny, and potential tax exposure for both funds and investors. The decision reinforces the importance of proactive compliance and accurate reporting.

What Should Funds & Investors Do?

Review current compliance processes

Track and meet all prescribed timelines

Ensure accurate disclosures and filings

Seek professional guidance where required

Stay informed and prepared. Early action is key to protecting tax benefits under the UAE Corporate Tax framework.

UAE E-Invoicing Penalties Introduced Under Cabinet Decision No. 106 of 2025

The UAE has strengthened its digital tax framework with the issuance of Cabinet Decision No. 106 of 2025, introducing penalties related to e-invoicing compliance. This move supports the country’s transition toward a fully digital and transparent tax system.

What the Decision Covers

E-invoicing requires businesses to issue invoices in a structured electronic format and comply with FTA-approved technical and procedural standards. Under the new decision, penalties may apply for:

Failure to issue invoices in the prescribed electronic format

Delayed or non-submission of electronic invoices

Incorrect or incomplete invoice data

Non-compliance with FTA system requirements

These measures aim to reduce errors, improve reporting accuracy, and curb tax evasion.

Impact on Businesses

The decision mainly affects VAT-registered businesses, especially those relying on manual or outdated invoicing systems. Non-compliance may result in financial penalties, increased audit exposure, and operational disruptions.

How to Prepare

Businesses should review their invoicing processes, adopt FTA-compliant e-invoicing solutions, and ensure finance teams are trained on the new requirements. Early readiness will help avoid penalties and ensure smooth compliance as enforcement increases.

Conclusion

Cabinet Decision No. 106 of 2025 highlights the UAE’s commitment to digital tax compliance. Businesses that act early and align their systems with e-invoicing requirements will be better positioned to operate confidently in the evolving tax landscape.

New FTA Protocols for Declining Residual Tax Refunds During Audits

Understanding FTA Decision No. 9 of 2025

The Federal Tax Authority (FTA) has released Decision No. 9 of 2025, introducing new protocols that allow the authority to decline or pause residual tax refund requests when a taxpayer is undergoing an audit. Effective from 1 January 2026, this decision strengthens the UAE’s compliance framework and ensures that refunds are issued only when all audit requirements are fully satisfied.

Why This Decision Matters

Residual tax refunds often arise when taxpayers claim excess input tax or adjustments. With the new protocols, the FTA aims to prevent misuse of refund mechanisms during periods of scrutiny and ensure transparency during audits.

Key Conditions for Declining Residual Refunds

Under the new rules, the FTA may reject or temporarily withhold refunds if:

Audit findings indicate possible additional tax liabilities that may arise after assessment.

There is evidence or suspicion of tax evasion, either directly by the taxpayer or within their supply chain.

A taxpayer has pending or unsubmitted tax returns, including VAT or any other tax type.

Requested documentation is not provided on time, causing delays in audit procedures.

The taxpayer shows lack of cooperation, incomplete responses, or non-compliance during the audit.

These measures ensure that the FTA can safeguard tax revenue while completing a fair and accurate audit process.

What Businesses Should Focus On

To avoid refund delays or declines, businesses should:

Maintain accurate and complete tax records

Ensure all returns are filed on time

Respond promptly to FTA information requests

Strengthen audit readiness and internal controls

Seek professional guidance when facing audit risks

Conclusion

FTA Decision No. 9 of 2025 underscores the importance of robust tax compliance in the UAE. Businesses must stay proactive, maintain transparency, and ensure that all documentation aligns with FTA requirements—especially when applying for refunds during an audit.

UAE VAT Rules 2026: Key Highlights for Businesses

The UAE has introduced Federal Decree-Law No. 16 of 2025, bringing notable VAT changes effective 1 January 2026. These updates aim to simplify processes, strengthen compliance, and align VAT with the revised Tax Procedures Law.

A key amendment is the removal of self-invoicing under the Reverse Charge Mechanism. Businesses will now only need to account for VAT correctly and maintain proper supporting documents, reducing administrative steps.

The law also introduces stricter anti-evasion measures, allowing the FTA to deny input tax claims if transactions are linked to tax-evasion and the taxpayer “knew or should have known.”

Another important update is the five-year limit for reclaiming or using excess VAT credits. Unused credits beyond this period will lapse, making timely review essential.

Overall, these reforms strengthen transparency and bring more clarity to the VAT system. Businesses should update internal processes, verify suppliers, and review old VAT credits ahead of 2026.