📅 Effective: 16 June 2026

Applicants from the listed countries must submit a Good Conduct Certificate (Police Clearance Certificate) as part of their UAE visa application.

🌍 Countries Covered Under the Mandatory Police Clearance Certificate Requirement

Key Requirements:

✅ Obtain a Police Clearance Certificate from the competent authority in your home country.
✅ Get it attested by the UAE Embassy in your home country.
✅ Complete MOFA attestation in the UAE.
✅ Submit the attested certificate along with your UAE visa application.

⚠️ Early preparation is essential. Delays in obtaining or attesting the certificate could impact your visa processing timeline.

💡 TFCC Insight

Whether you’re an employer hiring overseas talent or an individual applying for a UAE visa, ensuring your documentation is complete before initiating the application can help avoid unnecessary delays, additional costs, and compliance issues.

At The First Check Consultants (TFCC), we assist with:
✔ UAE Visa & PRO Services
✔ Police Clearance Certificate Guidance
✔ UAE Embassy & MOFA Attestation Support
✔ Business Setup & Corporate Services

📞 Need assistance? Our experts are here to help you navigate the process smoothly.

🌐 www.thefirst-check.com
📧 Admin@thefirst-check.com
📞 +971 4 457 3223
📍 2403, Prism Tower, Business Bay, Dubai, UAE

Ensure Compliance. Drive Growth.

But have you considered whether the Capital Assets Scheme (CAS) applies?

Under the UAE VAT Executive Regulations, a Capital Asset is generally a capital expenditure item with a taxable value exceeding AED 5 million (excluding VAT) and having a useful life of:
🏢 10 years – Buildings or parts of buildings
⚙️ 5 years – Other capital assets

The Capital Assets Scheme requires businesses to review the use of the asset annually and adjust previously recovered VAT if the percentage of taxable use changes.

Example
A machine is purchased for:
Taxable Value: AED 6 million
VAT: AED 300,000
Adjustment Period: 5 years

Initial use:
✅ 100% taxable activities
VAT recovered: AED 300,000

In Year 3, taxable use reduces to 70%.
Annual adjustment amount:
AED 300,000 ÷ 5 = AED 60,000
Change in taxable use:
100% → 70% = 30% reduction

VAT adjustment required:
AED 60,000 × 30% = AED 18,000

This adjustment may need to be made each year for the remaining adjustment period if the usage pattern continues.

Common Issues Seen During VAT Health Checks
❌ Capital assets are not identified separately in the fixed asset register.
❌ Businesses incorrectly use the VAT amount instead of the AED 5 million taxable value threshold when assessing applicability.
❌ No annual review is performed after the initial VAT recovery.
❌ Changes in taxable and exempt use are not monitored.
❌ No supporting documentation exists for allocation percentages.
❌ Adjustments are not made following business restructuring or changes in activities.

Key Takeaway

1. The Capital Assets Scheme is not a one-time VAT exercise.
2. For qualifying assets, businesses must monitor usage for:
a. 5 years for most capital assets, and
b. 10 years for buildings and parts of buildings.

The most important question is not whether VAT was recovered correctly when the asset was purchased.

The real question is: Has your business reviewed the asset every year since it was first used, as required under the Capital Assets Scheme?
Failure to do so may result in VAT underpayments, overclaims, and unexpected exposures during an FTA audit.

hashtag#UAEVAThashtag#CapitalAssetsSchemehashtag#FTAhashtag#VATCompliancehashtag#VATAudithashtag#InputTaxhashtag#TaxRiskhashtag#Accountinghashtag#UAETaxhashtag#TheFirstCheckConsultantsGrouphashtag#CorporateTaxhashtag#DubaiBusinessDhiraj Sankhi CA, CIPA, CSCA Suraj SubediHeena ChughSarika SankhiThe First Check Consultants ]]> https://thefirst-check.com/are-businesses-understanding-the-uae-vat-capital-assets-scheme-correctly/feed/ 0 https://thefirst-check.com/uae-corporate-tax-ct-intellectual-property-ip-what-businesses-need-to-know/ https://thefirst-check.com/uae-corporate-tax-ct-intellectual-property-ip-what-businesses-need-to-know/#respond Tue, 23 Jun 2026 10:42:15 +0000 https://thefirst-check.com/?p=10288 Intellectual Property (IP) has become one of the most valuable assets for modern businesses, particularly in technology, software, AI, manufacturing, media, and brand-driven industries. However, the UAE CT treatment of IP income depends significantly on where the IP is held and how the income is generated.

What Qualifies as Intellectual Property?

IP generally includes:
✅ Patents
✅ Copyrights
✅ Software and Source Code
✅ Trademarks and Brands
✅ Designs and Models
✅ Proprietary Technology
✅ Know-how and Trade Secrets

CT Treatment – Mainland Companies
For a UAE Mainland company, income derived from IP is generally subject to CT at the applicable rate.
Examples of taxable IP income include:
1. Royalty income
2. Software licensing fees
3. Franchise fees
4. Trademark licensing income
5. Patent exploitation income
6. Technology licensing revenue

Sale or transfer of IP rights (subject to applicable CT provisions)
Accordingly, if a Mainland company owns and licenses IP to third parties, the resulting income will generally form part of taxable income.

CT Treatment – Free Zone Companies
Many businesses assume that all Free Zone income qualifies for the 0% Corporate Tax rate. This is not correct.

Under the UAE CT regime, income from Intellectual Property is generally treated as Excluded Activities Income for Qualifying Free Zone Persons (QFZPs).
This means:
❌ Royalty income from IP generally does not qualify for the 0% Free Zone Corporate Tax rate.
❌ Licensing income from trademarks, patents, copyrights, software rights, and similar IP assets is generally excluded from Qualifying Income.

As a result, such income may be subject to the standard 9% CT rate even where the IP is held by a Free Zone company.

Can a Free Zone Company Still Own IP?
Yes. A Free Zone company may legally own Intellectual Property and commercially exploit it. However, businesses should carefully assess:
The nature of the IP and Type of income generated, Substance requirements
Transfer Pricing implications,

Before placing IP in a UAE entity, businesses should evaluate:
✔ Whether the income will be royalty-based or operational business income
✔ Whether the entity is located in a Mainland or Free Zone
✔ Availability of QFZP benefits
✔ Transfer Pricing requirements
✔ Substance and DEMPE (Development, Enhancement, Maintenance,
Protection and Exploitation) functions
✔ Future exit or sale of the IP
✔ International withholding tax implications

Holding Intellectual Property in a UAE entity can provide commercial and operational advantages, but the CT implications require careful planning.

hashtag#UAECorporateTaxhashtag#IntellectualPropertyhashtag#IPHoldinghashtag#RoyaltyIncomehashtag#TransferPricinghashtag#QFZPhashtag#FreeZonehashtag#MainlandUAEhashtag#TaxPlanninghashtag#UAETaxhashtag#CorporateTaxUAEhashtag#SoftwareLicensinghashtag#TechnologyCompanieshashtag#TaxAdvisoryThe First Check ConsultantsDhiraj Sankhi CA, CIPA, CSCA Suraj SubediHeena ChughSarika Sankhi

✅ eInvoicing is not limited to VAT-registered businesses
Businesses falling within the scope of the regime may still require a Tax Identification Number (TIN) even if they are not registered for VAT.

✅ VAT Group members must use their own TIN
The guidance clarifies that each VAT Group member will use its own participant identifier rather than the VAT Group representative’s TRN.

✅ Non-resident businesses can also fall within scope
Non-resident suppliers required to issue UAE tax invoices may be required to comply with UAE eInvoicing requirements.

✅ Exempt and out-of-scope transactions may still require electronic invoice reporting
The regime is broader than VAT and focuses on transaction reporting and invoice exchange.

✅ Legal responsibility remains with the taxpayer
Even where an Accredited Service Provider (ASP) is used, the taxpayer remains responsible for the accuracy and compliance of invoice data.

✅ Intra-group transactions remain within scope
While transitional relief is available in certain cases, businesses should not assume group transactions are automatically excluded.

What Businesses Should Do Now
🔹 Review whether all group entities have the required tax identifiers.
🔹 Assess ERP and master data readiness.
🔹 Evaluate transaction flows involving related parties, non-resident entities, and exempt supplies.
🔹 Start planning ASP integration and testing well before the mandatory go-live dates.

The latest guidance shows that UAE eInvoicing is not simply a VAT compliance exercise—it is a broader digital reporting framework that will impact finance, tax, IT, procurement, and intercompany processes across many organizations.

Since the Federal Tax Authority (FTA) keeps adjusting its regulatory control and increasing audit tempos, small mistakes can quickly snowball into serious financial penalties. If companies want to detect, contain, and correct compliance problems fast, without derailing normal operations, then reaching out to Best Corporate Tax Consultants in UAE is the most direct path toward stronger corporate standing and better risk protection.

Common Corporate Tax Mistakes Affecting UAE Businesses

A lot of organizations, kind of unknowingly, keep running with structural gaps or bookkeeping inaccuracies, and that can trigger intense regulatory attention. In practice, some of the tax problems we see across corporate portfolios tend to repeat, like:

Wrongly reading Free Zone exemptions: One very common slip up is thinking that just being inside a Free Zone automatically means a 0% corporate tax rate. But companies must carefully meet the requirements for a “Qualifying Free Zone Person” (QFZP), and they should make sure their earnings come fully from “Qualifying Income”.

• Weak transfer pricing documentation: Deals between related parties, or connected persons, must follow the arm’s length principle without bending it. If the firm does not keep solid transfer pricing files, it can become an immediate red flag during an FTA audit.

Inaccurate expense deductions: not every business cost is automatically 100% tax-deductible. For example, entertainment outlays, certain interest expenses, and un-capitalized startup costs are often sorted in the wrong place, so the taxable income numbers come out wrong. And yeah, it happens more than people expect.

In economic epicentres like Dubai, where companies juggle big networks of international subsidiaries and stacked free zone setups, untangling these compliance knots can feel tricky, because the rules are nuanced and local. That’s where premier, localized legal know how matters most. Working with the Best Corporate Tax Consultants in Dubai helps businesses move faster to review past financial records, spot the real compliance holes, and apply corrective steps before any formal penalties are introduced.

Navigating regional nuances beyond Dubai

Tax obligations, and the day-to-day operational complexities just aren’t the same across all emirates; they can shift a lot depending on industry sector, local jurisdiction, and what the corporation is trying to accomplish.

For example, organizations that work out of the capital city often deal with heavier industries, government linked bodies, and even sovereign wealth frameworks. Keeping a workable tax approach in those tightly governed surroundings takes a specialized advisory. When you reach for the Best Corporate Tax Consultants in Abu Dhabi, your business can better use double taxation treaties, make sure their financial year timing is consistent, and safeguard those public-sector commercial relationships while staying in excellent tax standing.

Simultaneously, Northern Emirates like Ras Al Khaimah have rapidly emerged as top hubs for global manufacturing, logistics, and maritime trade, and that’s kind becoming the norm now. Startups and long-standing industrial firms working in these areas often find it hard to align their very specialized logistics structure with the latest tax compliance manuals. So, to address these niche regional bottlenecks in a fast way, forward thinking organizations usually bring in the Best Corporate Tax Consultants in Ras-Al Khaimah, and they recalibrate accounting methods, so their valuable tax-exempt status stays intact.

How Top Tax Experts Fix Errors Fast

When a corporate tax discrepancy shows up, procrastination becomes the biggest problem for a company. Under FTA rules, correcting it via a Voluntary Disclosure (VD) or by filing an amended tax return must be done in strict, preset timelines. Otherwise, the daily interest penalties can pile up fast, and yeah that gets ugly quickly.

The best corporate tax consultants in Dubai usually start with advanced diagnostic methods and broad “tax wellbeing” checks, so they can quickly map out what happened. They compare prior VAT submissions against corporate tax reporting, adjust the transfer pricing models and rebuild internal control processes so they’re far more resilient. It’s basically a rapid look back plus controlled remediation, not just paperwork.

Also, if the issue already became an official assessment or led to a fine, then professional involvement is essential. The best corporate tax consultants in Abu Dhabi bring the technical know how to handle administrative appeals, prepare formal reconsideration drafts, and speak for the company directly before the Tax Disputes Resolution Committee.

At the same time, the Best Corporate Tax Consultants in Ras-Al Khaimah work alongside growing mid-market enterprises and try to structurally optimize their corporate governance… meanwhile, bookkeeping system, sort of automatically flag non-compliant entries in real-time so nothing slips through, ever.

Safeguard Your Financial Future with The First Check

Honestly, mitigating tax risk is more like a living, breathing strategy not just a one-time operational thing. As international tax rules keep shifting and local enforcement gets a bit stricter, you’ll still need an error-free corporate profile, with real, elite oversight. So, when you align your enterprise with the Best Corporate Tax Consultants in UAE, you get that twofold benefit—quick error correction, but also long-term financial optimization too.

At The First Check Consultants, we offer world-class tax advisory built from 100+ years of collective elite consulting experience. Our team draws on multi-billion-dollar global enterprises, and top tier advisory networks, so the specialists can support corporate tax planning, transfer pricing evaluation, and swift error rectification across all emirates. Work with us now and protect your commercial interests, remove compliance anxieties, and keep a more profitable, regulatory-compliant roadmap ahead in the UAE market.

Read More – The UAE VAT Law requires businesses to maintain comprehensive accounting and VAT records to support all transactions.

Why Proper Accounting Matters for VAT
✅ Accurate VAT return preparation
✅ Correct classification of taxable, zero-rated, exempt, and out-of-scope transactions
✅ Proper recovery of input VAT
✅ Identification of reverse charge transactions
✅ Support during FTA audits and reviews
✅ Avoidance of penalties and tax adjustments
The Federal Tax Authority expects businesses to maintain a clear audit trail from the original transaction through to the VAT return submitted.

Key Records Every Business Should Maintain
As required under UAE VAT legislation, businesses should retain:
📌 Sales invoices
📌 Purchase invoices
📌 Credit notes and debit notes
📌 Import and customs documentation
📌 Export documentation
📌 VAT calculations and reconciliations
📌 General ledger and trial balance
📌 Fixed asset register
📌 Inventory records
📌 Bank statements
📌 Contracts and agreements
📌 Payroll records
📌 VAT return workings and supporting schedules

Record Retention Requirements
The UAE VAT framework generally requires records to be retained for at least 5 years. Real estate-related records must generally be maintained for 15 years, while other specific records may have extended retention requirements.

Practical VAT Audit Checklist
Before filing your VAT return, ask:
✔ Does the VAT return reconcile with accounting records?
✔ Are all tax invoices available and compliant?
✔ Have reverse charge transactions been identified?
✔ Is input VAT supported by valid documentation?
✔ Are exempt and taxable supplies correctly classified?
✔ Is there a clear audit trail from ledger to VAT return?

Key Takeaway
Good accounting is not just about financial reporting—it is the first line of defense in VAT compliance. Businesses that maintain accurate books, proper documentation, and regular VAT reconciliations are significantly better prepared for FTA reviews and audits.

A strong accounting system today can prevent costly VAT disputes tomorrow.

Are Foundations Subject to UAE CT?
As a general rule, a foundation incorporated in the UAE is considered a separate juridical person and falls within the scope of UAE CT. Therefore, unless a special exemption or transparent treatment applies, the foundation may be treated as a taxable person.

However, Article 17 of the UAE CT Law allows qualifying Family Foundations to apply for treatment as an Unincorporated Partnership (Tax Transparent Vehicle), resulting in the foundation itself not being subject to Corporate Tax

✅ Family Foundations
Where a foundation is established for family members and meets the conditions of Article 17 of the UAE Corporate Tax Law, it may qualify for tax transparent treatment, meaning the foundation itself may not be subject to
CT.

Conditions for Tax Transparent Treatment
A Family Foundation may qualify where:
✅ It is established for identified or identifiable natural persons (family members) or public benefit entities.
✅ Its primary purpose is holding, investing, managing, or distributing assets and investments.
✅ It does not conduct commercial business activities.
✅ It is not established primarily for CT avoidance

⚠️ Non-Family / Commercial Beneficiaries
If beneficiaries include unrelated persons, business partners, or corporate investors, the foundation may not qualify for Article 17 treatment and could become subject to UAE CT, along with additional compliance obligations.

🌍 Overseas Foundations & Trusts
UAE expats using foreign foundations or trusts should carefully assess:
• UAE management and control
• UAE-source income
• Permanent Establishment (PE) exposure
• Eligibility for tax transparent treatment

Key Takeaway
The tax outcome of a foundation can vary significantly depending on:
✔ Beneficiaries
✔ Activities performed
✔ Assets held
✔ UAE and overseas nexus

A properly structured family foundation can provide both succession planning benefits and tax efficiency, while non-family structures may trigger CT implications.

Need a review of your foundation structure?

The First Check Consultants Group can help assess UAE CT implications, compliance obligations, and structuring opportunities

A fast start means you cannot just waste time on repeated mistakes, and “let’s test it later” type delays. With the right corporate advisory partner, your legal setup, license submissions, and compliance measures are shaped properly from day one, not after months of confusion. When you try to identify the best business consultants in UAE, don’t just follow the polished brochure, or the generic promises. Look deeper at real know-how in your sector, understanding of localized regulations, and a broad toolkit of corporate solutions that matches your situation.

Why speed and strategy matter for UAE startups

Honestly, in the business world right now time is kind of like money. If you slow down your operational launch by even a couple weeks, you might lose market momentum, and yes, you can also face strange extra overheads, before you even get started. And then there is the paperwork, approvals from multiple government bodies, plus the whole corporate governance structure thing, which wants attention to detail. When you bring in professional best business setup consultants in UAE, founders often get past the usual friction points and push their time-to-market forward faster

Good advisors don’t just complete documents; they quietly map out your business approach too. They look at what you’re really doing and help decide the most cost-effective place to operate and which trade license type makes sense. Picking the wrong free zone, or just ignoring the local compliance updates, can kind of stop everything, right when you thought you were ready. So, if you want a strong, legally protected base it’s important to work with reputable business setup consultants in the UAE who understand the more subtle clauses in regional regulations, and yeah, those details matter more than people assume.

Essential Criteria for Selecting Top UAE Business Consultants

Finding the right consultancy firm really needs a bit of a systematic evaluation, not just a quick look. Here are the key factors you should consider when you pick your advisory partner.

Proven Experience and Collective Team Expertise

The regulatory landscape in the Middle East shifts quickly, especially after the Corporate Tax rollout and the stricter Anti-Money Laundering (AML) frameworks. Try to select firms that are supported by professionals with substantial hands-on experience, ideally people who came from international consulting leaders, and major enterprises. When you search for the best business consultancies in UAE, pay attention to the fact that they tend to bring together varied, highly experienced teams. These groups can handle complicated, large-scale projects, while still not disturbing your day-to-day operations too much.

Comprehensive Service Capabilities

A quick startup setup isn’t only about grabbing a commercial license. Like, your business will instantly need accounting frameworks, VAT registration, corporate tax compliance, banking help, and internal risk audits. If you rely on separate vendors for every little service, you end up with operational silos and yes, the costs tend to grow. Better approach is to find the best business consultants in UAE who provide a centralized, 360-degree suite of corporate operations. Having one holistic partner makes communication smoother across your financial, structural, and day to day operational needs, instead of you having to chase multiple people.

Deep Knowledge of Diverse Jurisdictions

Whether you’re aiming for a Dubai Mainland setup so you can trade directly in the local market, or you’re going with a specialized Free Zone entity in ADGM or DIFC for financial tech, your consultants need to understand the regulatory rules that are different in each zone. The best business setup consultants in UAE should be able to clearly separate the specific benefits, the capital requirements, and even the visa limitations connected with each corporate jurisdiction, so everything lines up with your long-range expansion plans.

4. Openness on Fee Structure and Timelines

One of those major red flags when you hire advisors is hidden costs, unclear timeframes, or muddled processing steps that are never really spelled out. A reputable business set up consultant in UAE tends to bring clear, structured pricing proposals and timelines that make sense. They map a solid trail from the first document clearance to the final corporate bank account opening, so you can relax, and have some financial predictability in hand.

Mitigating post-setup risks and building longevity

Honestly, the duty of a high-end consulting firm doesn’t stop the minute your license certificate is handed over. The whole post-setup phase is usually where the sharp compliance risks start to surface. If you don’t have proper corporate governance in place, plus accurate bookkeeping, plus firm compliance reviews, then your recently formed business might end up with heavy penalties, or it can get limited in how it operates.

For example, in the UAE, the AML/CFT rules are strict, so companies are expected to keep pristine records, and set out clear risk management protocols. The best consultancies keep supporting you beyond the initial formation, so you can work through the awkward parts of corporate finance, investment fundraising, and risk reduction. They stop being only temporary setup agents and instead become kind of long-term strategic collaborators, safeguarding your investments while also opening fresh financial potentials for what’s next.

Why choose The First Check Consultants?

Here at The First Check Consultants, we follow the real gold standards needed for swift and compliant startup deployment, and not some vague promises that sound nice. With more than 100+ years of combined experience coming from world-renowned consulting firms and multi-billion-dollar organizations, our team focuses on connecting local regulatory requirements with sharper industry best practices.

We provide end to end support too, starting from the first Mainland and Free Zone setups all the way through the heavier AML compliance work, corporate finance, accounting, and VAT advisory. In a lot of cases, it’s not just “getting started”, it’s building something steady, so we try to form long term partnerships that help startups handle early obstacles, strengthen financial planning, and reach sustainable commercial success in the competitive UAE market.

Claim Back VAT on Your Home Construction – Here’s How

🧾 Overview

The Federal Tax Authority updated its 2026 guide, making refunds faster and fully digital.

UAE Nationals can claim VAT on construction costs—if done correctly.

Mistakes lead to delays or rejection.

✅ Who Can Claim

You are eligible if:

• You are a UAE National
• You are building a new residential property
• The property is for personal or family use
• The home includes basic living facilities:
  • Bedroom
  • Bathroom
  • Kitchen

❌ Who Cannot Claim

You cannot claim VAT refunds for:

• Rental or investment properties
• Commercial buildings
• Hotels or guest houses
• Mixed-use developments

💰 What You Can and Cannot Claim

✔️ Eligible Costs

• Construction services
• Building materials
• Permanent fixtures (built-in items)

✘ Not Eligible

• Furniture and décor
• Movable appliances
• Non-essential landscaping
• Maintenance or repairs
• Luxury additions outside core construction

🔄 Key 2026 Changes (Simplified)

⚠️ TFCC Insights – What Actually Matters

This is where most people go wrong:

• Keep all invoices clean, complete, and VAT-compliant
• Upload documents regularly, not at the end
• Ensure your contractor follows proper invoicing standards
• Most delays happen due to missing or incorrect paperwork
• Plan VAT compliance before construction starts, not after

Doing this late is like trying to fix your foundation after building the house. Technically possible, unnecessarily painful.

🧠 How TFCC Can Help

VAT refunds look simple on paper. In reality, they’re detail-heavy and unforgiving.

At The First Check Consultants (TFCC), we help you:

• Assess eligibility upfront
• Guide contractors on correct invoicing practices
• Organize and manage all documentation
• File your claim accurately
• Handle FTA queries and follow-ups
• Ensure faster approvals with minimal errors

In short, we make sure you actually get your money back instead of chasing it for months.

🚀 Get Your VAT Refund Right the First Time

Don’t leave your refund to chance or last-minute corrections.

👉Speak to an Expert
👉Get Your VAT Refund Reviewed

Author
CA Piyush Papneja
Partner, The First Check Consultants
📧 admin@thefirst-check.com
🌐 www.thefirst-check.com

(Everything you need to know about charging VAT only on profit under the latest FTA guidance)

Read More –

Introduction

Businesses dealing in second-hand goods, antiques, and collectibles often run into a classic VAT headache. If VAT is charged on the full selling price, you end up taxing value that has already been taxed before. Not exactly the definition of fairness.

To fix this, the UAE introduced the Profit Margin Scheme (PMS) — a special arrangement where VAT is applied only on the profit margin instead of the full selling price.

To finally remove the guesswork, the Federal Tax Authority issued VAT Guide VATGPM1 (January 2026) — the first dedicated and detailed guidance on PMS.

Who Should Care About This

This isn’t niche. If you operate in any of these sectors, this guide is basically required reading:

• Used vehicle dealers
• Second-hand electronics resellers
• Antique and collectibles traders
• Luxury watch and jewellery resellers (where eligible)
• Businesses selling assets with blocked input VAT
• VAT advisors and finance teams

What is the Profit Margin Scheme?

Under normal VAT rules:

• VAT is charged on the full selling price

Under PMS:

• VAT is charged only on the profit margin (selling price – purchase price)

That’s the difference between paying tax on reality vs paying tax on your entire turnover like a masochist.

Eligible Goods

The scheme typically applies to goods that were already subject to VAT earlier:

• Second-hand goods suitable for reuse
• Antiques (usually over 50 years old)
• Collectors’ items (coins, stamps, historical items)
• Goods with blocked input VAT recovery under Article 53 (in specific cases)

2026 Guide – Quick Comparison

• Guidance: Earlier unclear → Now detailed PMS guide
• Eligibility: General → Clearly defined
• Purchase Proof: Basic → Strict documentation required
• Non-registered Purchases: Unclear → Self-documentation allowed
• Invoicing: Vague → Mandatory wording required
• VAT Display: Inconsistent → Cannot show VAT separately
• Loss Sales: Not defined → No VAT, no offset allowed
• VAT Returns: Limited clarity → Clearly defined reporting

Key Compliance Risk Areas

Businesses applying PMS need to be unusually disciplined here:

• Evidence that goods were previously subject to VAT
• Proper purchase documentation (especially from individuals)
• Correct PMS-specific invoice wording
• VAT not shown separately on invoices
• Accurate VAT return reporting
• Inventory-level tracking and reconciliation

Miss these, and the authorities won’t politely disagree. They’ll just recalculate everything on full value.

TFCC Insight

The January 2026 guide signals a clear direction from the FTA:

More clarity, but also stricter documentation and governance expectations.

Yes, PMS can significantly reduce VAT liability. But if applied incorrectly, the consequences are… predictable:

• VAT reassessed on full selling price
• Financial penalties
• Scheme disqualification

What Businesses Should Do Now

Before implementing PMS, businesses should:

• Review ERP and invoicing configurations
• Update invoice formats with correct PMS wording
• Strengthen purchase documentation processes
• Maintain detailed stock and margin records
• Align VAT return reporting with new guidance

PMS is one of those rare tax mechanisms that actually benefits businesses. Naturally, it only works if you follow the rules with near-obsessive precision.

How TFCC Can Help

• PMS eligibility assessment
• Invoice and ERP system review
• Documentation and compliance setup
• VAT return alignment and reporting
• Ongoing advisory and audit support

Full Guide Reference – https://tax.gov.ae/Datafolder/Files/Pdf/2026/Guide/Profit%20Margin-Scheme-EN-02-01-2026-re.pdf

Conclusion

The Profit Margin Scheme offers a clear opportunity to reduce VAT liability for eligible businesses. However, it comes with strict documentation and compliance requirements.

With the 2026 guidance from the Federal Tax Authority, expectations are now clearer—leaving little room for error. Businesses should review their processes and ensure proper implementation to avoid penalties and reassessments.

Author
CA Piyush Papneja
Partner, The First Check Consultants
📧 admin@thefirst-check.com
🌐 www.thefirst-check.com