UAE: Recent Key Updates to UAE's Evolving Tax Landscape: Mandatory E-Invoicing Rollout, Updated Free Zone Corporate Tax (CT) Qualification Rules, and Tiered Excise Tax Reforms

The UAE continues to advance its tax framework with significant developments in e-invoicing, corporate tax qualification rules, and excise tax reforms.

Mandatory E-Invoicing Rollout
On 24 October 2024, the UAE Ministry of Finance (MoF) launched the e-invoicing portal to guide businesses on the forthcoming electronic invoicing requirements. According to Ministerial Decisions No. 243 and 244 of 2025, the phased rollout will commence with a pilot program on July 1, 2026, followed by mandatory compliance for businesses with annual revenues exceeding AED 50 million by January 1, 2027. Smaller businesses and government entities will follow in subsequent phases, with full implementation expected by October 2027.

The system will adopt a decentralized continuous transaction control and exchange (DCTCE) model, utilizing the Pan-European Public Procurement On-Line (PEPPOL) network. Businesses must appoint an Accredited Service Provider (ASP) to facilitate the electronic transmission of invoices to the Federal Tax Authority (FTA). This initiative aims to reduce VAT leakage, enhance data accuracy, and improve overall tax administration.

Updated Free Zone Corporate Tax Qualification Rules
Effective from 1 June 2023, Ministerial Decision No. 229 of 2025 redefines qualifying activities and commodities for Free Zone Persons under the UAE Corporate Tax Law. Key updates include:

• Expanded Definition of Qualifying Commodities – Besides metals, minerals, energy, and agricultural commodities, the definition now includes industrial chemicals, associated by-products, and environmental commodities such as carbon credits and renewable energy certificates. Associated by-products are secondary products produced during the manufacturing or extraction of qualifying commodities but exclude packaged consumer goods unless specifically listed.
• Trading Activities Clarification – Physical trading of qualifying commodities, associated derivative trading for risk hedging, and structured commodity financing are considered qualifying activities. However, businesses whose revenue from distribution, warehousing, logistics, or inventory management exceeds 51% of total revenue for the tax period will no longer qualify for the 0% CT benefit for commodity trading.
• Expanded Qualifying Activities – “Treasury and financing services to related parties” now explicitly include services provided for a business’s own account, widening the scope for CT benefits.
• Distribution of Goods from a Designated Zone – Such activities are considered qualifying if goods are imported through the designated zone and supplied to entities that resell, process, or alter them, or to public benefit entities.

Tiered Excise Tax Reforms
From 1 January 2026, the UAE will adopt a tiered-volumetric excise tax model for sugar-sweetened beverages. Under this system, excise tax rates will depend on sugar content, replacing the current flat-rate model. Products will be categorised as high, moderate, or low sugar based on defined thresholds, with specific exclusions such as 100% natural juices and dairy products.

This reform aims to align excise taxation with public health objectives, encouraging healthier consumption. Businesses producing, importing, or stockpiling sweetened beverages must assess product composition, register excise goods, and comply with new reporting requirements.

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Reference/Citation

UAE E-Invoicing Programme | UAE Ministry of Finance – https://mof.gov.ae/en/about-ministry/mof-initiatives/einvoicing/

Federal Decree-Law No. 16 of 2024 on VAT Amendments | UAE Ministry of Finance – https://mof.gov.ae/en/home/

Federal Decree-Law No. 17 of 2024 on Tax Procedures | UAE Ministry of Finance – https://mof.gov.ae/en/home/

Ministerial Decision No. 229 of 2025 Regarding Qualifying Activities | UAE Ministry of Finance – https://mof.gov.ae/en/home/

Ministerial Decision No. 243 of 2025 Regarding E-Invoicing Rollout | UAE Ministry of Finance – https://mof.gov.ae/en/home/

Ministerial Decision No. 244 of 2025 Regarding E-Invoicing Implementation | UAE Ministry of Finance – https://mof.gov.ae/en/home/

Excise Tax Public Clarification EXTP012 | Federal Tax Authority – https://mof.gov.ae/en/home/