In partnership with PGP Tax Consultancy
The UAE’s tax landscape is evolving rapidly. With corporate tax, Pillar Two,
transfer pricing, and an expanding VAT regime, tax and finance directors face increasing complexity. Add to this a lack of applicable practice to rely on, coupled with severe non-compliance penalties—reaching up to 200% of the tax due—and the challenge becomes clear: how to achieve tax certainty in an uncertain environment?
A second opinion matters
Many companies delegate their tax advisory work to the same firm that handles their audit. While this may seem efficient, it often results in overlooked errors. Audit and tax teams tend to confirm each other’s conclusions—sometimes subconsciously, sometimes intentionally.
Tax managers, meanwhile, often aim to avoid ‘conflict’ by having the auditor validate the advice, assuming it will lead to smoother year-end reporting. But avoiding conflict with the auditor may end up in conflict with the Federal Tax Authority (FTA) instead.
What tax managers must do is seek a second opinion on critical tax positions. Constructive professional disagreement at the advisory stage helps sharpen tax position and reduce the risk of future disputes.
Use compliance assurance tools wisely
Compliance assurance tools such as clarification requests and Advance Pricing Agreements (APAs) can provide greater certainty in tax matters.
For example, the clarification process with the FTA—when used strategically—can serve as a powerful mechanism to reduce uncertainty and manage risk. As the FTA itself states, “the FTA considers itself administratively bound to follow the position set out in the clarification…”
However, obtaining a favourable clarification is far from straightforward. It requires presenting a compelling case supported by thorough tax and factual analysis. A tax advisor is someone who can successfully guide a tax manager through this process—starting with detailed legal reasoning in tax advisory memos and advancing to well-structured formal submissions. When executed properly, the process offers a high degree of legal certainty.
Build your defence file early
FTA audits may occur years after a return is filed. By that time, key team members may have moved on, and critical documentation could be missing. Just as VAT audits became widespread four years after the introduction of VAT, corporate tax audits are expected to intensify over time. That is why it is essential to train your team now to document every key tax position, the rationale behind it, and all relevant internal approvals. With the support of a tax advisor, you can begin building your defence
file early—identifying what evidence must be gathered and ensuring it is recorded accurately and systematically.
By Maria Nikonova, managing director at PGP Tax Consultancy.
This article was first published in the June 2025 print issue of Law Middle East.
