In this edition, we bring you the latest updates in direct and indirect taxation in the UAE, covering key legislative changes, FTA clarifications, and compliance alerts to help businesses stay ahead.
FTA Decision No. 7 of 2025: Audited Special Purpose Financial Statements for Tax Groups
On 16 July 2025, the Federal Tax Authority issued Decision No. 7 of 2025, effective for tax periods beginning on or after 1 January 2025. The Decision sets out the requirements for preparing and maintaining audited special purpose financial statements for Tax Groups under Federal Decree-Law No. 47 of 2022 and its amendments.
In line with this, the FTA has now published Public Clarification CTP007, which provides detailed guidance on the preparation of financial statements for Tax Groups.
Tax Groups are required to prepare special purpose financials in the form of Aggregated Financial Statements. These are prepared by aggregating the standalone financial statements of the parent company and all subsidiaries within the group, with elimination of intercompany transactions.
The Aggregated Financial Statements must be audited under International Standards on Auditing (ISA) and must comply with IFRS. The deadline for submission is nine months after the end of the relevant tax period.
Standalone accounts form the base, not consolidated financials.
Goodwill, bargain purchase gains, and fair value adjustments to assets and liabilities from consolidated accounts are excluded.
Where business combinations occur without acquisition of a separate legal entity, related balances are aggregated in full.
Investments outside the Tax Group are recognised at cost less impairment.
Uniform accounting policies across all group members are mandatory.
Aggregated statement of financial position.
Aggregated statement of profit or loss.
Aggregated statement of other comprehensive income.
Aggregated statement of changes in equity.
Framework used – whether prepared under IFRS or IFRS for SMEs.
Basis of aggregation – how the standalone accounts of members were combined.
Key accounting policies and judgments – material policies, estimates, and assumptions applied.
Supporting notes – explanations and notes that clarify and back up the figures reported.
Where a member leaves a Tax Group, it must adopt the carrying values of assets and liabilities from the Group accounts as opening balances in its standalone financials. If accounting standards prohibit this, taxable income is to be computed as though such values had been adopted.
The Federal Tax Authority (FTA) has released a detailed manual guiding taxpayers on how to change their Corporate Tax period. Such changes may be required due to a change in the financial year, mergers, joining a Tax Group, or other valid business reasons. Taxpayers are expected to provide supporting documentary evidence to substantiate the factual and legal basis for the change, and the FTA may raise additional queries as part of its review.
The manual also explains the treatment of tax periods shorter or longer than 12 months and outlines the process for updating the tax period directly through the FTA Tax Portal. Upon approval, the taxpayer’s Corporate Tax Registration Certificate will be updated to reflect the new period.
The Federal Tax Authority (FTA) has released a detailed manual guiding taxpayers on the Corporate Tax de-registration process. This may be required in situations such as cessation of business. The manual highlights that, before approving a deregistration request, the FTA may require submission of supporting documents and a valid reason for the cessation of business or business activity. Additionally, taxpayers must submit a final corporate tax return and settle any outstanding tax liabilities to complete the de-registration process.
In continuation of the July Tax Newsletter, the FTA has now issued Public Clarification EXTP012. This clarification provides detailed guidance on the upcoming tiered-volumetric model for calculating Excise Tax on sweetened drinks, based on their sugar content. The new model is scheduled to take effect from 1 January 2026.
A Sweetened Drink is defined as any beverage that contains added sugar, artificial sweeteners, or other sweeteners, intended for consumption as a drink.
Natural Sugar Only: Drinks containing only natural sugar, without any added sugar or sweeteners, will not be subject to Excise Tax.
Artificial Sweeteners Only: Drinks containing only artificial sweeteners (e.g. aspartame, sucralose, saccharin, stevia) will be classified as sweetened drinks but subject to zero Excise Tax.
Lab Report Requirement: A future date will be announced by the FTA, after which drinks can only be registered as Excise Goods if supported by a laboratory report confirming sugar content.
Carbonated Drinks: The separate category for carbonated drinks will be abolished. Their tax treatment will instead depend on sugar content and classification as sweetened drinks.
Tiered Categories: Excise Tax will be determined based on sugar levels per 100ml:
Default Classification: Where no lab report is provided, a drink will be treated as a high sugar sweetened drink until evidence supports a lower category.
Energy drinks (remain subject to 100% Excise Tax under current rules).
100% natural fruit and vegetable juices with no added sugar.
Milk, dairy products, and related substitutes contains at least 75% milk.
Baby formula and baby food.
Beverages for special dietary or medical use.
Drinks prepared by individuals for personal consumption.
Drinks served in restaurants or cafés in open containers intended for direct consumption.
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