UAE Tax Enforcement Has Entered a New Phase

The UAE Federal Tax Authority (FTA) announced in April 2026 that it conducted approximately 176,000 market inspection visits during 2025. That figure represents an 89% increase compared to approximately 93,000 inspections conducted in 2024. More importantly, 2024 itself represented a 135% increase compared to 2023.

The trend is unmistakable. The UAE tax system is moving rapidly from implementation to enforcement. While most inspection activity relates to VAT and Excise Tax compliance, the broader message is relevant for every UAE business:

The FTA now possesses significantly greater operational capacity, audit resources, and enforcement capability than at any point in the country's tax history.

For companies operating under the Corporate Tax regime introduced in 2023, this development should not be ignored.

The UAE Federal Tax Authority conducted 176,000 inspection visits during 2025, an 89% increase compared to 2024. Although many inspections focused on VAT and Excise Tax compliance, the figures indicate a broader strengthening of UAE tax enforcement that increases Corporate Tax, Transfer Pricing, and audit risks for businesses operating in the UAE.

The Numbers Behind the Enforcement Surge

FTA Inspection Growth

The pace of growth is extraordinary. Few tax authorities globally have expanded field enforcement activity at this rate within such a short period. The FTA also announced:

These figures demonstrate that enforcement activities are producing measurable revenue outcomes.

Why Corporate Taxpayers Should Pay Attention

Some business owners incorrectly assume these inspections relate only to retail businesses and VAT compliance.

That assumption is dangerous. The same authority that enforces VAT also administers:

• UAE Corporate Tax
• Transfer Pricing
• Tax Residency Certificates
• Economic Substance obligations
• Corporate Tax registrations
• Related Party disclosures

As the Corporate Tax regime matures, audit activity inevitably follows. This pattern has occurred in every major tax jurisdiction worldwide. The UAE is unlikely to be an exception.

The Three Developments Businesses Should Connect

The inspection statistics are only one part of a much larger story. When viewed together with recent regulatory developments, a clear picture emerges.

1. Expanded Enforcement Activity

176,000 inspections. 89% annual growth.

2. New Penalty Environment

The UAE has substantially expanded its penalty framework. Penalties can arise from:

• Failure to register for Corporate Tax
• Late registration
• Failure to maintain documentation
• Incorrect tax returns
• Transfer Pricing failures
• Failure to provide information during an audit

For many businesses, the cost of correcting mistakes after an audit significantly exceeds the cost of proactive compliance.

3. Extended Audit Exposure

One of the least discussed developments is the extended audit timeframe available in certain circumstances.

In specific cases involving tax evasion or serious non-compliance, tax records may remain reviewable for up to 15 years.

For many business owners, this changes the way compliance should be viewed.

The question is no longer: "Will this survive review next year?" The question becomes: "Will this survive review a decade from now?"

Why Transfer Pricing Is Emerging as a Major Risk Area

Transfer Pricing is likely to become one of the most actively reviewed areas of UAE Corporate Tax compliance.

This is particularly relevant for:

• DMCC companies
• DIFC entities
• ADGM structures
• Family offices
• Holding companies
• International groups
• Businesses with overseas affiliates

Common transactions attracting scrutiny include:

• Management fees
• Intercompany loans
• Royalty arrangements
• Shared service charges
• Cost allocations
• Intellectual property licensing

Many businesses still assume that documentation can be prepared later if requested. That approach conflicts directly with OECD standards and UAE legislation. Transfer Pricing documentation is expected to exist contemporaneously.

Real-World Example

Scenario: UAE Holding Structure

A UAE holding company receives:

• Dividends from foreign subsidiaries
• Management fees from related entities
• Interest income from group financing

The company assumes its structure qualifies for favorable tax treatment. Years later, an audit occurs. The FTA requests:

• Transfer Pricing documentation
• Board minutes
• Intercompany agreements
• Evidence supporting pricing policies
• Substance documentation

If those records were never prepared, reconstructing them retrospectively can be difficult, expensive, and potentially unsuccessful.

Compliance Risk Checklist

Ask yourself:

✓ Have we registered for Corporate Tax?

✓ Have we assessed Transfer Pricing obligations?

✓ Do we have related-party agreements?

✓ Are our board decisions documented?

✓ Can we support our tax positions with evidence?

✓ Have we reviewed QFZP eligibility?

✓ Do we maintain adequate economic substance?

✓ Are our accounting records audit-ready?

If multiple answers are "No", your risk profile may be higher than expected.

APA Programme: A Strategic Opportunity

While enforcement is increasing, the UAE is simultaneously introducing mechanisms that reward proactive taxpayers. One important example is the Advance Pricing Agreement (APA) programme. An APA allows businesses to agree Transfer Pricing methodologies with the tax authority before disputes arise. Potential benefits include:

• Reduced audit risk
• Greater certainty
• Fewer disputes
• Improved governance
• Better investor confidence

For large groups with substantial related-party transactions, APAs may become a key strategic tool over the coming years.

Common Mistakes Businesses Make

Frequently Asked Questions

Has the UAE increased tax audits?

Yes. The FTA conducted approximately 176,000 inspection visits during 2025, representing an 89% increase compared to 2024.

Are Free Zone companies exempt from audits?

No. Free Zone companies remain subject to UAE tax compliance requirements and may be audited by the FTA.

Does 0% Corporate Tax mean no compliance obligations?

No. Businesses benefiting from a 0% rate must still register, maintain records, and satisfy applicable conditions.

What is the biggest Corporate Tax risk in 2026?

For many international groups, Transfer Pricing compliance is emerging as one of the most significant areas of risk.

Can the FTA review old tax periods?

In certain circumstances, tax records may remain subject to review for extended periods, including up to 15 years in serious cases.

What is an APA?

An Advance Pricing Agreement is a mechanism allowing taxpayers and tax authorities to agree Transfer Pricing methodologies in advance.

Sources

UAE Ministry of Finance
https://mof.gov.ae

Federal Tax Authority
https://tax.gov.ae

DMCC
https://www.dmcc.ae

Dubai Chambers
https://www.dubaichambers.com

OECD Transfer Pricing Guidelines
https://www.oecd.org/tax/transfer-pricing

Federal Decree-Law No. 47 of 2022 (Corporate Tax)

https://mof.gov.ae

The headline figure of 176,000 FTA inspection visits is not merely a VAT enforcement statistic.

It is evidence of a tax authority that is rapidly expanding its operational capabilities, increasing compliance expectations, and strengthening its ability to identify and challenge non-compliant taxpayers. Corporate Tax compliance, Transfer Pricing documentation, economic substance, and governance are no longer future considerations. They are present-day business requirements.

The companies that prepare early will face significantly less risk than those that wait for an audit notice to arrive.

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Affinitas assists UAE businesses, Free Zone companies, family offices, and international groups with Corporate Tax compliance, Transfer Pricing documentation, audit readiness reviews, and strategic tax advisory.

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