UAE bank lending rises along with consumer confidence

Bank lending advanced 7.1 per cent in December, the fastest rate in at least four years, as cheaper financing and upbeat consumer confidence boosted demand for goods ranging from cars to real estate, Central Bank data showed yesterday.

“We are at the turning point of accelerating growth. Asset quality is improving at the same time lending appetite is improving. Loan demand is picking up,” said Jaap Meijer, the head of research for financials at the Dubai-based Arqaam Capital. “Banks have become more confident and investments are picking up, so you have both sides working. We expect double-digit growth going forward.”

The economy grew more than 4 per cent last year after several years of lacklustre performance following the 2008 financial crash. Banks had a particularly good run and last month, reporting a slew of double-digit earnings increases amid rising spending and cheaper interest rates.

Eibor, the interest rate at which banks lend to each other, is hovering near an eight-year low, driven in part by flows of money into bank accounts, stocks and real estate from jittery investors in other emerging markets that view the UAE as an oasis of stability. The 12-month Eibor stands at 1.177 per cent. Since 2006, when records began, it has averaged 2.83 per cent, reaching a high of 5.52 per cent in 2007.

Car makers reported record sales last year. The Ford Taurus posted a 60 per cent growth in sales across the region last year and topped the saloon segment, according to a Middle East Automotive Council report.

Property prices have also been heating up, especially after the removal of rental caps in Abu Dhabi. And in the UAE as a whole, prices advanced more than 30 per cent last year, according to data from property agents.

mkassem@thenational.ae

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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