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UAE plans first sovereign bond issue

A law will soon be passed that will enable the country to source outside funding for infrastructure and other spending.

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ABU DHABI // The UAE plans to issue its first sovereign bond to fund infrastructure and other spending, following issues by Abu Dhabi and Dubai, a senior finance ministry official said on Sunday. "A law will come out soon and it will specify where the debt must be spent. One (area)... is infrastructure," Younis al Khoori, director general at the ministry of finance told Reuters. The government, the world's third-largest oil exporter, has not yet determined the timeframe or the size of the issue, Mr Khoori said. The UAE is a federation of seven emirates including Abu Dhabi, the main oil producer in the OPEC country, and regional trade and tourism hub Dubai. Abu Dhabi raised $3 billion in late March as part of a $10 billion bond programme planned over the next two years for general government spending. Dubai sold $10 billion of bonds to the UAE central bank in February and is planning to raise another $10 billion to support state-linked companies struggling to weather the financial crisis and a real estate slump. The ministry of finance will handle the debut bond issue on behalf of the federal government and plans to appoint an advisor and seek a sovereign rating, Mr Khoori said. States and corporates in the Gulf Arab region, including Abu Dhabi, raised over $15 billion in bonds in the last four months and are eyeing more issues as spreads narrow and demand rises for high-rated emerging market debt. *Reuters

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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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How to wear a kandura

Dos

  • Wear the right fabric for the right season and occasion 
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Don’ts 

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