Increased audits lift UAE tax revenue by over $1bn

• UAE tax audits up 46% in 2025
• Enforcement drives revenues up
• AI and e-invoicing boost compliance

The UAE is stepping up tax enforcement, with audits rising by almost half last year as the Federal Tax Authority enters a new phase driven by artificial intelligence and e-invoicing.

The FTA increased audits by 46 percent in 2025, according to its latest annual report, helping to lift tax revenue by more than $1 billion.

The figures suggest the country’s decade-long experiment with taxation is moving into a more assertive phase, with the focus shifting from introducing levies to ensuring compliance, according to Nils Vanhassel, head of the Middle East tax practice at Addleshaw Goddard.

“This is not so much a coming of age as the natural next phase,” he said. “The UAE has spent close to a decade building its tax framework, from VAT and excise tax through to corporate tax and the global minimum tax. Now that a mature framework is in place, the focus is gradually shifting from implementation to enforcement.”

Tax revenues from VAT and excise duties rose to AED46 billion ($12.5 billion) in 2025, up from AED41 billion a year earlier, thanks to economic growth and improved compliance.

The growth of the tax system is also evident in the workload facing authorities, with the FTA reviewing around 1.7 million transactions during the year, more than 20 percent higher than in 2024.

The introduction of a 9 percent corporate tax from the start of 2025 has significantly expanded the authority’s reach. Unlike VAT, which is pegged at 5 percent but only applies to companies above a certain turnover threshold, corporate tax potentially brings almost every business operating in the country into the tax net.

The FTA has invested heavily in technology and headcount and has been increasingly open about its use of AI and data analytics to identify risks and target audits.

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The next step will be the introduction of e-invoicing. The system has entered its pilot phase and will become mandatory for larger businesses from 2027, making transactions visible to the tax authority in near real time and bringing the UAE closer to the digital tax systems already operating in Europe.

“What will really change over the coming years is the efficacy of tax audits,” Vanhassel said. “Combined with the authority’s growing use of AI, that points to audits which are better targeted rather than simply more numerous.”

The developments also reflect a broader shift across the Gulf. The OECD’s global minimum tax initiative has accelerated the adoption of corporate taxation across the region and, once Bahrain introduces its corporate tax in 2027, every GCC state will have a broad-based corporate income tax regime.

“For a region that was, until very recently, known for being tax-free, that is a remarkable change over a short period,” Vanhassel said.