Entity Setup
Entity Setup Strategies in the UAE After the 2026 Tax Amendments
New UAE tax procedure amendments effective 1 January 2026 reshape how businesses structure and claim credits—smart entity setup is now more crucial.
By NomadicTax Research Team • 5-8 min read • August 14, 2026
## Recent Changes That Matter
The UAE’s UAE Ministry of Finance issued **Federal Decree-Law No. 17 of 2025**, amending certain provisions of the Tax Procedures Law (Federal Decree-Law No. 28 of 2022). These amendments take effect **1 January 2026** and tighten rules around refund requests, limitation periods, and binding guidance. ([mof.gov.ae](https://mof.gov.ae/en/news/ministry-of-finance-to-implement-amendments-to-the-tax-procedures-law-starting-early-2026/?utm_source=openai))
### What Was Amended
- Credit balances and refund requests must be made **within 5 years** from the end of the relevant tax period. Claims after this period are invalid—except in certain exceptional situations. ([mof.gov.ae](https://mof.gov.ae/en/news/ministry-of-finance-to-implement-amendments-to-the-tax-procedures-law-starting-early-2026/?utm_source=openai))
- The Tax Authority may issue **official binding directions** to both taxpayers and itself on how legislation should be applied. This creates more legal certainty.
- Limitation periods for tax audits or assessments may still be triggered in certain cases even **after expiration** if claims are submitted near or during the last year of the limitation period.
- Transitional provisions allow some flexibility if the five-year period expired before 1 January 2026 or will expire within a year. Taxpayers in those scenarios have additional time windows for refund or voluntary disclosure requests. ([mof.gov.ae](https://mof.gov.ae/en/news/ministry-of-finance-to-implement-amendments-to-the-tax-procedures-law-starting-early-2026/?utm_source=openai))
## Structuring Entities Post-Amendment
Businesses forming entities or selecting jurisdictions/branches should consider:
- Ensuring the entity is set to **maintain accurate documentation** that supports refund claims. Poor documentation means missed refunds.
- If using **holding companies**, verify whether full ownership and meeting other conditions will qualify them for corporate tax exemptions (via Cabinet Decision No. 55). Entities wholly owned by exempt entities may be exempt if conditions are satisfied. ([mof.gov.ae](https://mof.gov.ae/en/news/ministry-of-finance-announces-issuance-of-cabinet-decision-expanding-the-scope-of-corporate-tax-exemption/?utm_source=openai))
- Evaluate where to locate **R&D activities**: the UAE’s Phase 1 R&D tax incentive provides up to **50% non-refundable credits** on qualifying expenditures up to AED 5 million. Entities may extend that to refundable or larger incentives later. ([mof.gov.ae](https://mof.gov.ae/en/news/uae-launches-phase-1-of-research-and-development-tax-incentives-programme/?utm_source=openai))
## Practical Structuring Tips
- Choose legal forms and ownership structures that align with the **expanded corporate tax exemptions**—fully owned foreign entities could be eligible under certain Cabinet Decisions.
- For companies expecting refund credit balances, plan financial flows so that claims are within the 5-year deadline. If not yet, consider making voluntary disclosures or seeking guidance now.
- Entities engaging in R&D should record qualifying expenditures carefully under OECD Frascati definitions and ensure expenditures are incurred in the UAE.
## Example Scenario
An entity established in Abu Dhabi planning to set up a holding structure: Suppose it’s wholly owned by a UAE government-controlled fund. Under Cabinet Decision No. 55, such foreign entities that are wholly owned by exempt entities may qualify for corporate tax exemption—if other conditions are met. Meanwhile, if the same entity incurred significant R&D expenditures in 2022 but did not claim any refund or credit, after 1 January 2026, they need to check if the 5-year period for claiming has expired. If it has expired but within one year, transitional relief may apply.
## Key Takeaway
The tax amendments effective 2026 raise the stakes for entity setup. Planning ownership structures, maintaining documentation, and acting within deadlines are now vital to ensure maximum tax efficiency and compliance.