The UAE aims to attract investment in a number of new sectors to diversify its economy away from oil, the country’s Minister of State for Foreign Trade said.
“As the UAE strives to push forward its economic diversification agenda, we are encouraging investments in scientific research, logistics, health care, food security, manufacturing and advanced technologies, and renewable energy, among many other areas,” Dr Thani Al Zeyoudi told the World Investment Forum on Tuesday.
“Additionally, we are focused on driving innovation and empowering small businesses and start-ups by improving access to finance and encouraging public-private collaboration.”
The UAE, the Arab world's second-largest economy, is undertaking various measures to attract more FDI into the country. This year, it unveiled a new industrial strategy to boost the contribution of the industrial sector to Dh300 billion ($81.68bn) in the next 10 years from Dh133bn.
The country overhauled its commercial companies' law last year to attract more foreign capital and annulled the requirement for onshore companies to have an Emirati shareholder.
“The UAE today has all the makings of an ideal innovation hub complemented by advanced infrastructure and supportive legislative and regulatory frameworks,” Mr Al Zeyoudi said. “Through such forward-looking strategies, the country is establishing itself as a dynamic hub for advanced industries.”
The UAE economy is expected to grow 3.1 per cent in 2021, the International Monetary Fund said. That is higher than the Central Bank of the UAE's estimate, which projects the country’s economy will expand 2.1 per cent this year and 4.2 per cent in 2022.
“We are confident that our efforts in the current phase are key to strengthening the very foundation of our economy for the future by ensuring its ability to keep up with the sudden shifts in the global economic landscape,” Mr Al Zeyoudi said.
The country was “emerging as a model for economic growth … not only for the region but for the whole world”, due to its bold actions on the economic front, he said.
The UAE continues to attract investment in a number of sectors to boost its economy. The total foreign direct investments in the country surged 11 per cent in 2020 despite the pandemic.
The UAE climbed up in the inflow of FDI’s ranking to reach 15th position last year, Mr Al Zeyoudi said, citing the UN report. It also moved up six spots to 13th place in FDI outflow.
“These achievements can be attributed to many factors such as stability, modern infrastructure, effective economic policies and legislations, the UAE’s strategic location and open economy, free transfer of profit and revenues and assets, as well as a diverse modern tolerant society, among many others," he said.
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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
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