Recent UAE tax developments affect cross-border investment, banks, small businesses and multinational groups. Qatar has ratified its double tax treaty with the UAE, the FTA has clarified AT1 corporate tax treatment, Small Business Relief is extended to 2029, and new Top-up Tax registration deadlines apply. This alert sets out the practical actions for each.
| Update | Who should consider this | Why it matters | Immediate action |
|---|---|---|---|
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UAE-Qatar DTA
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UAE businesses with Qatar investment, financing or service flows
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Potential reduction in withholding tax leakage and more favourable service PE threshold once the treaty is effective
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Map Qatar payment and service arrangements and prepare treaty relief documentation
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FTA Clarification CTP012 on AT1 payments
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Banks issuing Additional Tier 1 capital instruments
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Payments not included in Accounting Income should not be deductible for UAE CT purposes
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Reconcile AT1 accounting treatment with CT computations
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Small Business Relief – FTA Tax Information Bulletin and election extension till 31 December 2029
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Eligible UAE resident small businesses
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Relief remains elective till tax period ending on or before 31 December 2029 and subject to conditions, exclusions and record-keeping requirements
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Assess eligibility, maintain supporting records, and evaluate the impact of the election before filing the Corporate Tax Return
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FTA Decision No. 12 of 2026
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UAE members of in-scope MNE groups
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Introduces procedural timelines for Top-up Tax registration, deregistration and notifications
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Registration and notification deadlines, including transitional deadlines
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The UAE and regional tax landscape continues to evolve, with recent developments affecting cross-border investment, financial institutions, small businesses and multinational groups within the scope of the UAE Top-up Tax regime. This alert summarises the key updates and practical considerations for businesses operating in, from or through the UAE.
1. Qatar ratifies the Double Taxation Agreement with the United Arab Emirates
Qatar has completed its domestic ratification step for the Double Taxation Agreement between Qatar and the United Arab Emirates through Emiri Decree No. 39 of 2026. The UAE had previously ratified the treaty in April 2025. The treaty is expected to enter into force once the required diplomatic notifications are exchanged between the two jurisdictions and should generally apply from the beginning of the calendar year following entry into force, subject to the specific effective date provisions in the treaty.
The treaty is expected to provide a more favourable framework for payments and activities between Qatar and the UAE. In particular, it eliminates source taxation on dividends and interest and reduces the applicable treaty rate on royalties and technical service fees to 3%, subject to the relevant treaty conditions, including residence, beneficial ownership and anti-abuse requirements.
The treaty also provides a more favourable service permanent establishment threshold than Qatar domestic law. A service PE would generally arise where services are performed in the other state for more than nine months, or 270 days, within the relevant period. For construction, installation and assembly projects, a PE arises where the project continues for more than 183 days.
Point of view:
UAE businesses with Qatar-related investment, financing, royalty, technical service fee or service PE exposure should review existing arrangements and prepare treaty relief documentation. As Qatar generally operates a pay-and-reclaim process for treaty relief claims, the practical refund process and supporting documentation should be considered in advance.
2. FTA Public Clarification CTP012: Corporate Tax treatment of AT1 instrument payments by banks
The Federal Tax Authority has issued Public Clarification CTP012 on the UAE Corporate Tax treatment of payments made by banks in respect of Additional Tier 1 instruments. AT1 instruments are regulatory capital instruments issued by banks to meet applicable capital adequacy requirements and are generally classified as Additional Tier 1 capital for regulatory purposes.
The FTA has clarified that where payments made by banks on AT1 instruments are not included in Accounting Income, such payments are not deductible for UAE Corporate Tax purposes. This is particularly relevant where AT1 instruments are classified as equity instruments under IFRS and coupon or dividend payments are recognised directly in equity, rather than as an expense in the statement of profit or loss.
The clarification is limited to the tax treatment of payments made by the issuing bank. It does not address the tax position of investors, the treatment of payments received by AT1 holders, the accounting classification of AT1 instruments, or whether a particular instrument qualifies as AT1 capital under regulatory rules.
Point of view:
Banks should review the accounting classification of AT1 instruments and ensure that UAE Corporate Tax computations do not claim deductions for coupon or dividend payments that are not included in Accounting Income. Historical filing positions and provision calculations should also be checked where relevant.
3. FTA Basic Tax Information Bulletin and extension till 31 December 2029: Small Business Relief
The FTA has issued a Basic Tax Information Bulletin for small businesses on 30 July 2026, consolidating guidance on Corporate Tax registration, Small Business Relief, tax return filing and record-keeping. The bulletin does not introduce new law, but it provides a useful compliance reminder for businesses approaching their Corporate Tax filing obligations.
Eligible Resident Persons with revenue not exceeding AED 3 million may elect for Small Business Relief subject to the relevant conditions. The relief is not automatic and must be elected in the Corporate Tax return for each relevant tax period.
The bulletin also highlights the distinction between the AED 1 million Corporate Tax registration threshold applicable to natural persons and the AED 3 million revenue threshold for Small Business Relief. Small Business Relief is not available to Qualifying Free Zone Persons or members of MNE groups with consolidated group revenue exceeding AED 3.15 billion.
A significant development accompanying the FTA guidance is the issuance of Ministerial Decision No. 131 of 2026 by the Ministry of Finance on 7 August 2026, which extends the availability of Small Business Relief by three additional years, from tax periods ending on or before 31 December 2026 to those ending on or before 31 December 2029.
Point of view:
The extension provides continued relief for eligible small businesses and additional time to manage Corporate Tax compliance obligations. Businesses should assess eligibility annually, maintain robust supporting documentation, and carefully evaluate the impact of electing for Small Business Relief on the utilization of tax losses, carried forward net interest expenditure, and other tax attributes. The election should therefore be considered as part of the overall Corporate Tax strategy rather than a standalone compliance requirement.
4. FTA Decision No. 12 of 2026: Top-up Tax registration and deregistration requirements
FTA Decision No. 12 of 2026 establishes the registration, deregistration and notification framework for entities subject to UAE Top-up Tax under the UAE Pillar Two regime. The Decision applies to fiscal years starting on or after 1 January 2025 and is a key procedural development for multinational enterprise groups with UAE constituent entities.
Entities that fall within the scope of UAE Top-up Tax are required to register with the FTA within seven months from the end of the first fiscal year in which they become subject to the rules. As a transitional measure, entities with a fiscal year ending before 30 April 2026 must submit the registration application no later than 30 November 2026.
The Decision also sets out deregistration requirements, the conditions for deregistration, and the timing for in-scope and out-of-scope notifications. Where a Domestic Designated Filing Entity has been appointed, the DDFE may submit Top-up Tax registration, deregistration and notification applications on behalf of relevant UAE group members.
Point of view:
In-scope MNE groups should map UAE entities, confirm whether a Domestic Designated Filing Entity will be appointed, and diarise all registration, notification and deregistration deadlines. Transitional deadlines should be prioritised for groups with fiscal years ending before 30 April 2026.
What businesses should do now
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Review Qatar-related inbound and outbound payment streams, service arrangements and PE exposure, and prepare for treaty relief processes once the UAE-Qatar DTA enters into force.
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For banks, reconcile AT1 accounting treatment with UAE Corporate Tax computations and confirm whether any payments not included in Accounting Income have been deducted.
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For small businesses, confirm revenue, residency status, exclusions and record-keeping before electing Small Business Relief in the Corporate Tax return.
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For multinational groups, identify UAE entities in scope of Top-up Tax, determine whether a Domestic Designated Filing Entity should be appointed, and deregistration and notification deadlines.
How Grant Thornton can help
Grant Thornton UAE can support businesses with treaty impact assessments, AT1 Corporate Tax reviews, Small Business Relief eligibility and filing support, and UAE Top-up Tax readiness, including registration analysis, entity mapping, deadline tracking and documentation support.
This alert is intended for general information only and does not constitute tax, legal or accounting advice. Specific advice should be obtained based on the facts and circumstances of each business.
