FTA issues five binding VAT directives on tax transactions

The Federal Tax Authority (‘FTA’) has recently started issuing a new type of documents – “Directives on Tax Transactions”. A Directive on Tax Transactions is a public decision issued by the FTA to establish the basis for applying or implementing the provisions of UAE tax legislation in relation to a specific category of tax transactions.

Unlike a Public Clarification, a Directive is binding on both the FTA and the relevant taxpayers. A Directive generally remains effective until it is replaced, withdrawn, or the legislation on which it is based is amended or repealed. Taxpayers falling within the scope of a Directive are therefore required to follow the tax position specified in that Directive. These Directives are issued following approval by the FTA Board of Directors, or a committee formed by the Board, and coordination with the UAE Ministry of Finance.

In relation to the effective dates, Directive No. 2 of 2026, concerning VAT adjustments following a registrant’s exit from a VAT group, expressly takes effect from 1 August 2026. The remaining four Directives do not specify a separate effective date. All five Directives provide that they will be published in the Official Gazette.

KPMG has a team of experienced tax specialists who can assist businesses in assessing the impact of the Directives on their existing VAT positions, reviewing the applicable VAT treatment, implementing the required changes to systems and processes, and supporting discussions with or submissions to the FTA.

We would be pleased to discuss how these Directives may affect your business and assist in determining the appropriate way forward. Should you have any questions, please contact your usual KPMG representative or any of the tax professionals listed below.