The Central Bank of the UAE is launching an Intraday Liquidity Facility that will allow licensed financial institutions to mitigate intraday liquidity risks.
The new liquidity management facility will be introduced on April 21 as part of the central bank’s new Dirham Monetary Framework, the CBUAE said in a statement on Thursday.
It will allow eligible counterparties – participants in the UAE Funds Transfer System – to access funding in UAE dirhams from the central bank on an intraday basis to make sure payments are settled on a real-time basis.
To obtain intraday funding from the CBUAE, participants are required to submit "eligible collateral", with terms set out in the conditions of the new facility. The ILF will be offered at zero cost to incentivise financial institutions to repay borrowed funds by the designated cut-off time at the end of each business day, the CBUAE said.
“The launch of the Monetary Bills programme earlier this year, along with the existing Islamic Certificates of Deposits programme, facilitates the development of this innovative facility," Khaled Mohamed Balama, governor of the CBUAE, said.
“I am confident that the financial markets infrastructure deployed for this facility will not only enable licensed financial institutions to mitigate intraday liquidity risks, when there are timing mismatches between their daily inflows and outflows, but also help increasing efficiency of payments through the UAE Funds Transfer System.”
President Sheikh Khalifa appointed Mr Balama as governor of the CBUAE on Wednesday. Later that day, the regulator also announced its decision to extend the Targeted Economic Support Scheme (Tess) to the end of 2021. The Dh50 billion ($13.61bn) zero-cost funding programme was set up a year ago to help lenders maintain funding flows through the economy following the onset of Covid-19.
Last month, the CBUAE said liquidity in the banking system has returned to pre-Covid-19 levels and that lenders had substantially reduced their use of Tess. The amount being drawn down last month declined to Dh22bn, half of the maximum drawdown of about Dh44bn in second quarter of last year at the height of the pandemic induced-slowdown.
The UAE's banking regulator has introduced various measures to develop the banking sector and improve payments systems in the UAE.
In March, it introduced new rules that address large-value payment systems (LVPS) and retail payment systems (RPS) that apply to remittance companiesoperating in the UAE and payment schemes that offer clearing or settlement in dirhams outside the country.
The regulator has also taken more measures to protect consumers and in February it introduced the UAE's first financial consumer protection regulatory framework, which provides a "broad spectrum of appropriate behaviour and conduct expected of licensed financial institutions".
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
