UAE reforms remake local firms

Last year the UAE was getting to grips with transfer pricing and it was causing a lot of excitement amongst accountancy firms. One year on and it has already had a profound effect on the make-up of the local industry, leading to the growth of more specialised tax and advisory practices. Alongside the larger international accounting firms, a number of regional and boutique firms have expanded their transfer pricing capabilities to support businesses with compliance, documentation, benchmarking studies, and cross- border structuring.

“The UAE’s role as a regional headquarters and investment hub has also increased demand for advisers with expertise in international tax, transfer pricing, and Pillar Two readiness,” said Ashish A Athavale, partner for Tax Advisory Services at BDO UAE. “While the market is still developing, there is a noticeable shift towards more specialised and technically focused advisory services, particularly for multinational groups and family-owned businesses operating across multiple jurisdictions.”

Transfer pricing is driving the need for local firms to include more documentation and to be more formal in their approach, which is helping improve the quality of the work.

Faiyaaz Rajkotwala, managing partner at Salim Rajkotwala Chartered Accountants LLC, an MGI worldwide member firm, thinks that the UAE Corporate Tax has materially changed the advisory landscape, and transfer pricing is one of the clearest examples of this shift.

“Historically, many UAE businesses operated with limited formal documentation around related-party pricing, particularly where transactions were domestic or within family-owned groups,” he said. “That has changed significantly. As FTA-registered tax agents, we are seeing that transfer pricing is no longer viewed as a purely multinational issue. Mid-market groups, family businesses and free zone entities are now paying much closer attention to related-party transactions, shareholder funding, management charges and intercompany agreements. Transfer pricing has moved from being a technical tax concept to a boardroom governance issue for UAE businesses, and that has created room for more specialised advisory firms and specialist teams within established firms.”

Auditing work continues to be scrutinised with ongoing regulatory changes in an effort to give UAE firms an impeachable international reputation. A key development for the auditing and accounting profession has been the visible implementation of the Professional Compliance Committee framework introduced in 2023. The Ministry of Economy and Tourism has now reported 20 disciplinary decisions, with fines exceeding AED 2.5 million and penalties including suspension of licenses.

This is significant because it shows that professional regulation is no longer operating only at the level of registration and licensing requirements,” said P.V. Sheheen, managing partner for Legal at BDO UAE. “There is now a clearer enforcement track against non-compliance, professional misconduct, and failures to meet applicable standards. Audit and accounting firms should therefore expect closer scrutiny of professional conduct, quality controls, documentation, independence, and regulatory compliance.”

Saad Maniar, chief executive officer, Baker Tilly UAE, has welcomed a key recent reform that demands the signing of an MoU by three regulators to centralise the review process. “This should reduce duplication, ease the burden on firms, and support a more coordinated oversight framework. Broader market discussions amongst peers have also focused on stronger coordination, capacity building, training, and technology to enhance audit quality,” he said.

The strengthening of the processes of local firms is vital to the success of one of the UAE most significant upcoming changes for businesses and accounting firms -e-invoicing.

“For accounting firms, this will become a major client-readiness exercise,” said Sheheen. “Businesses will need assistance in reviewing ERP and accounting systems, mapping invoice data fields, cleaning customer and supplier master data, validating VAT and tax classifications, appointing accredited service providers, testing invoice exchange and reporting workflows, and ensuring proper electronic storage and audit trails.”

“The accounting and advisory industry in the UAE continues to evolve positively,” said Badshah Ambalath, partner at Bericht Audit and Advisory, a PrimeGlobal member firm. “The introduction of Corporate Tax, enhanced AML requirements, ESR transition, and upcoming e-invoicing reforms have significantly increased the importance of finance and compliance functions within businesses. Overall, the profession is becoming more structured, technology-driven, and strategically relevant than ever before.”

While business is certainly booming, fee pressure remains a feature of the UAE market, particularly in statutory audit and routine accounting work. The UAE remains highly competitive, and clients continue to compare fees closely. However, the nature of fee pressure is changing.

“Where services are commoditised, price sensitivity remains high,” Rajkotwala. “But for work involving corporate tax, transfer pricing, regulatory compliance, AML/CFT, and complex assurance, clients are increasingly recognising that technical quality and risk management matter. As licensed auditors regulated by the DFSA, we are seeing greater willingness to pay for expertise where the consequences of poor advice can be significant. In other words, clients may still negotiate fees, but they are becoming more careful about choosing the cheapest adviser for work that can create tax, regulatory or governance exposure.”

Maniar would argue that clients are not being careful enough. “Although fee pressure has eased to some extent, it remains an ongoing challenge, particularly in audit,” he said. “Regulators have raised concerns about fee undercutting, noting that low fees can undermine audit quality by limiting investment in people, training, and systems.”

Ambalath has noted that businesses are currently more focused on essential compliance-related services, while discretionary advisory spending has reduced. “Domestic compliance services such as VAT, corporate tax filings, bookkeeping, and audit continue to see stable demand, whereas broader advisory mandates have softened in recent months,” he said.

A further dampener has been put on the market by the ongoing conflict in the Middle East. While the UAE has avoided becoming directly involved, ripples of unease have spread, nonetheless.

“During the initial phases of the conflict, a widespread downturn was observed across all business sectors,” said Martina Landauer, managing associate at Ecovis Dubai. “Since the implementation of the ceasefire, however, the market has stabilised and is demonstrating a gradual recovery; the outlook for future growth remains encouraging.”

Landauer has seen no evidence of demand driven by corporate downsizing or restructuring. “Financial institutions are currently adopting a lenient approach toward debt recovery and are responding favourably to loan restructuring requests,” she said. “Overall, banks remain highly liquid but are demonstrating increased risk aversion.”

Bayhas Al Kudaimy, managing partner of Ecovis Dubai and Challakkara Zeinuddeen, auditor and financial advisor at Ecovis Dubai, have seen clients become more cautious, particularly in sectors exposed to cross-border trade, logistics, shipping, aviation, financing and regional counterparties. They see increased demand for regulatory, restructuring and risk-management advice, especially around sanctions, AML/CFT compliance, contractual exposure, liquidity planning and contingency arrangements. Banks remain supportive on a selective basis but are generally applying more conservative credit and risk assessments.

While everyone IAB spoke to is upbeat about any possible impact the conflict may have on the UAE market, there is no doubt that investment is slowing. “Key decisions relating to CAPEX and investments have been postponed, though not cancelled,” said Vinayak Aatreya, managing director of M&M Al Menhali Auditing, an MGI worldwide member firm. “The real estate, hotel, and restaurant sectors have experienced significant impact. At the same time, we have seen an increase in inquiries related to restructuring, and our merger and acquisition team has received substantial interest in potential buy‑side and sell‑side opportunities. As of now, there is no specific support from banks; however, the government is considering and introducing certain relief measures should the conflict persist.”

Despite all this, Shivendra Jha, head of advisory services at BDO UAE, expects the UAE’s position as a regional headquarters hub to accelerate further, particularly with increased activity in family offices, private wealth structures, and cross-border investments. Rajkotwala agreed, pointing out that the fundamentals of the UAE have not disappeared: it remains safe, well-regulated, tax-efficient and commercially attractive. However, he expects businesses are likely to be more thoughtful about risk, governance and resilience than they may have been in previous years.

The looming threat of war has pushed the government into accelerating its transformation into a global trade and logistics powerhouse, hastening the diversification of trade corridors. Emergency measures include the activation of alternative shipping and logistics corridors through the UAE’s eastern ports of Fujairah and Khorfakkan, expansion of air freight bridges for critical pharmaceutical and food supplies, the launch of a Green Corridor with Oman, and a new Sharjah-Dammam trade bridge linking the UAE more efficiently with Saudi Arabia and wider Gulf markets.

The government has also introduced a Dh1 billion economic support fund to ensure business continuity and targeted relief for small and medium enterprises, alongside a Five-Pillar Financial Institution Resilience Package unveiled by the Central Bank to maintain liquidity and sustain credit flows across the economy.

For now, it is business as usual. Al Kudaimy expects continued emphasis on enforcement, compliance and practical implementation rather than a single major legislative reform. Corporate tax, e-invoicing, AML/CFT obligations, financial regulation and digital-asset supervision will remain key focus areas, while geopolitical uncertainty is likely to keep restructuring, refinancing and risk-management work relevant across a number of sectors. Ambalath sees e-invoicing having a substantial impact on businesses, particularly in VAT compliance, automation, and system integration. “Over the next 12 months, we expect increasing awareness, ERP upgrades, and technology adoption initiatives among businesses,” he said. “At present, the immediate demand is more visible toward IT implementation partners and ERP providers rather than accounting firms, but over time this is expected to create additional opportunities for tax, audit, and compliance professionals as businesses adapt to the new ecosystem.”

It can only be hoped that all out war can be avoided and the UAE can be left to prosper in peace and enjoy the rewards of a reformed economy.