FTA updates Clarifications and Directives Policy, expands Advance Pricing Agreements framework and introduces Directives on Tax Transactions effective 1 March 2026.
The UAE Federal Tax Authority (FTA) has issued an updated Policy on Issuing Clarifications and Directives, amended by Decision No. 2 of 23 February 2026 and effective from 1 March 2026. A key update is the introduction of Directives on Tax Transactions, a new category of public decisions that set out how tax legislation applies to specific transactions.
Federal Tax Authority Decision No. 5 of 2026, also effective from 1 March 2026, establishes a comprehensive framework for issuing clarifications and directives to taxpayers on their federal tax obligations and penalties. The policy is structured around two main categories: clarifications (private and public) and directives (administrative exceptions, input tax apportionment, advance pricing agreements, and tax transaction directives).
The FTA provides guidance through both private and public clarifications to address technical uncertainties. Private clarifications are stamped and signed documents issued to a specific taxpayer based on their particular facts and circumstances. Requests must relate to federal taxes and include all required information, such as facts, relevant legislation, and estimated tax impact. A fee may apply if the request covers more than one tax. These clarifications are binding on the Authority for the relevant taxpayer, provided the facts match those submitted. However, requests may be rejected if the issue is already addressed in public guidance, is based on hypothetical scenarios, or raises concerns of tax avoidance or evasion. Clarifications remain valid unless legislation is amended or a new public clarification or guide is issued on the same matter. Public clarifications and guides are general documents explaining how tax legislation is implemented and must be reviewed by the Ministry of Finance before issuance to ensure consistency with national tax policy.
Directives serve as mechanisms for granting exceptions or establishing binding implementation rules. The FTA may grant administrative exceptions related to tax invoices, credit notes, and proof of export for VAT and Excise Tax, typically valid for three years unless the underlying legislation changes. Taxpayers may also request an alternative input tax apportionment method where the standard approach does not produce a fair and reasonable result. In such cases, applicants are generally required to be registered for at least six months, or 12 months for certain recovery percentages. Approved methods must be applied for two or four years, and any recalculations are limited to the previous three tax years.
Advance Pricing Agreements (APAs) determine the arm’s length price for transactions between related parties. Unilateral APAs are currently available for domestic transactions, with cross-border applications expected from the fourth quarter of 2026. Transactions should generally reach at least AED 100 million per tax period, although the FTA may accept lower amounts at its discretion. The process includes a pre-filing consultation completed within nine months and a final agreement concluded within 30 months, covering three to five tax periods.
Directives on Tax Transactions are publicly issued decisions that define how tax legislation applies to specific transactions. These directives are binding on both the Authority and the relevant group of taxpayers until they are replaced or the legislation is repealed.
Across most request types, including clarifications, exceptions, and apportionment requests, standard procedural timelines apply. If the FTA requests additional information, the applicant must respond within 40 business days or the request may be closed. Draft applications must also be submitted within 40 business days of initiation, with a reminder issued after 20 business days.
