The UAE’s Stance Against Base Erosion and Profit Shifting (BEPS)

The UAE’s Stance Against Base Erosion and Profit Shifting (BEPS)

Base Erosion and Profit Shifting (BEPS) refers to a set of tax planning strategies that exploit loopholes and mismatches in international tax regulations. Companies may utilize various practices, including transfer pricing manipulation, controlled foreign corporations (CFCs), and treaty shopping, to artificially shift profits to low-tax jurisdictions, reducing their overall tax burden. BEPS erodes the tax base of countries where economic activity genuinely occurs, hindering their ability to fund essential public services.

This article explores the UAE’s proactive approach to tackling BEPS, highlighting its commitment to international tax transparency and the potential consequences for companies engaging in such practices.

The UAE’s Commitment to Combating BEPS

The UAE has emerged as a prominent global business hub, attracting foreign investment through its competitive corporate tax rate and strategic location. However, the country recognizes the importance of a robust and transparent tax regime. Here’s how the UAE actively addresses BEPS:

  • Membership in the Inclusive Framework: The UAE joined the OECD/G20 Inclusive Framework on BEPS in 2018. This framework fosters international cooperation in developing and implementing a set of agreed-upon measures to combat BEPS practices (1).

  • Implementation of BEPS Measures: The UAE has adopted various recommendations outlined in the BEPS project. These include:

    • Transfer Pricing Guidelines: The UAE Ministry of Finance (MoF) has issued guidelines aligned with the OECD Transfer Pricing Guidelines, ensuring fair pricing practices for transactions between related parties (2).
    • Country-by-Country Reporting (CbCR): The UAE has implemented CbCR requirements, obliging multinational enterprises (MNEs) to report financial and tax information on a country-by-country basis. This enhances tax transparency and provides authorities with a clearer picture of global profit allocation within MNE groups (3).
  • Focus on Transparency and Compliance: The UAE recognizes that a strong reputation for transparency and adherence to international tax standards is crucial for attracting foreign direct investment (FDI). By implementing BEPS measures, the UAE strives to create a predictable and transparent tax environment for businesses operating within its borders.

Why Companies Should Avoid BEPS Practices in the UAE

While the UAE offers a competitive tax environment, BEPS activities are not tolerated. Here’s why companies should avoid such practices:

  • Increased Scrutiny and Penalties: Tax authorities in the UAE are actively monitoring transfer pricing practices and potential BEPS attempts. If a company is suspected of manipulating prices or shifting profits inappropriately, significant penalties can be imposed, including fines and back taxes owed (4).

  • Reputational Damage: Companies engaging in BEPS risk negative publicity, potentially damaging their brand image and investor confidence.

  • Evolving Regulatory Landscape: International tax regulations and the UAE’s tax framework are constantly evolving. What might be considered a grey area today could be deemed unacceptable practice tomorrow. Companies that prioritize long-term compliance will be better positioned to navigate this evolving landscape.

Follow recommended practices and avoid BEPS

The UAE’s proactive approach to BEPS demonstrates its commitment to international tax cooperation and fostering a transparent business environment. While the UAE offers a competitive tax regime, companies should prioritize compliance with transfer pricing regulations and international tax standards. By adhering to these guidelines, companies can avoid hefty penalties and reputational risks, ensuring a sustainable and successful presence in the UAE.


  1. OECD. “OECD/G20 Inclusive Framework on BEPS.” – https://www.oecd.org/tax/beps/
  2. Ministry of Finance, UAE. “Transfer Pricing Guidelines for Related Party Transactions” –  https://tax.gov.ae/Datafolder/Files/Pdf/2023/Transfer%20Pricing%20Guide%20-%20EN%20-%2023%2010%202023.pdf
  3. Federal Decree-Law No. 23 of 2018 on Amending Certain Provisions of Federal Law No. 6 of 2018 on Tax Procedures – https://tax.gov.ae/en/legislation.aspx
  4. KPMG. “UAE Tax Alert: BEPS Developments and CbC Reporting” – https://kpmg.com/ae/en/home/insights/2022/12/tax-flash-uae-corporate-tax-released.html
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