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January 07, 2026

GCC Tax Updates You Can’t Ignore: What UAE & Bahrain Businesses Need to Know (January 2026)

As we move into 2026, tax authorities across the UAE and Bahrain are continuing to tighten frameworks, close grey areas, and strengthen enforcement. From refund restrictions during audits to expanded excise rules, VAT flexibility, transfer pricing certainty, and global minimum tax alignment — the direction of travel is clear: greater scrutiny, clearer rules, and less tolerance for gaps in compliance.

Here’s a practical breakdown of the latest updates — and what they mean for businesses in real terms.

UAE Updates

1. FTA Decision No. 9 of 2025 – Refunds Can Be Declined During Audits

Effective: 1 January 2026

Under this decision, the FTA may withhold or decline VAT refunds where a taxpayer is under audit and certain risk conditions exist.

Refunds may be declined if:

  • Significant tax risk is identified during the audit
  • There are reasonable grounds to suspect tax evasion
  • The refund relates to transactions linked to suspected evasion
  • The taxpayer has overdue or outstanding tax returns 

Why this matters:
 Refunds can no longer be treated as automatic. Businesses with weak documentation, unresolved filings, or audit exposure may face cash flow delays, even where a refund would otherwise be due.

2. FTA Decision No. 10 of 2025 – Sugar & Sweetener Calculation for Excise Tax

Effective: 1 January 2026

This decision introduces a clear mechanism for calculating sugar and sweetener content in concentrates, powders, gels, and extracts where no reliable guidelines exist.

Key points:

  • Sugar content must be calculated based on the final prepared beverage
  • Manufacturer instructions or an FTA-approved methodology must be used
  • Supports accurate classification under the tiered sugar-based excise regime 

Why this matters:
 This reduces ambiguity, strengthens consistency, and lowers the risk of disputes — but it also raises the bar for data accuracy and product classification.

3. FTA Decision No. 11 of 2025 – Additional Excise Tax Deduction Cases

Effective: 1 January 2026

This decision expands scenarios where previously paid excise tax may be deducted, while introducing tighter controls and documentation requirements.

Why this matters:
 There are now clearer recovery opportunities — but only for businesses with robust records, traceability, and compliance processes.

4. VAT Administrative Exceptions Guide (VATGEX1)

The updated guide explains when the FTA may grant administrative relief from standard VAT obligations, such as:

  • Registration or deregistration
  • Filing deadlines
  • Payment timelines
  • Record-keeping requirements 

Exceptions are discretionary and must be formally requested with supporting evidence.

Why this matters:
 This provides flexibility for genuinely exceptional cases — but it is not a workaround for poor compliance or late action.

5. Advance Pricing Agreements (APAs) – Corporate Tax Guide CTGAPA1

The new APA guide explains how businesses can agree transfer pricing methodologies in advance with the FTA.

Key benefits:

  • Certainty on related-party pricing
  • Reduced audit and adjustment risk
  • Lower exposure to penalties 

Why this matters:
 For groups with cross-border or related-party transactions, APAs are becoming a strategic risk-management tool, not just a technical option.

Bahrain Updates

1. Domestic Minimum Top-Up Tax (DMTT) Guide v1.2

Bahrain continues alignment with the OECD Pillar Two framework, introducing a 15% effective minimum tax for large multinational groups.

The updated guide clarifies:

  • Scope and qualifying entities
  • Registration responsibilities
  • Safe harbours and transitional relief

2. VAT Deregistration Manual v2.0

The revised manual provides clearer guidance on:

  • Voluntary vs mandatory deregistration
  • Required documentation
  • Procedural steps and timelines 

Why this matters:
 Exiting VAT incorrectly can trigger penalties — this update reduces errors but increases expectations of accuracy.

Final Thoughts

Across the GCC, tax systems are becoming more precise, more digital, and more enforceable. Flexibility still exists — but only for businesses that act early, document properly, and engage proactively.

At Nishe, we help businesses interpret these updates, assess risk, and implement practical compliance strategies — without unnecessary disruption.

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