In April 2024, I addressed the risks and benefits of utilising artificial intelligence tools to support your business’s efforts to manage corporate tax risks. This applies equally to value-added tax (VAT) and other government legislative-driven regimes.
We now know more about the impact our growing dependence on these solutions is having on people. This should cause some concern to organisations with separate internal functions as well as those dependent on external consultants.
I want to look at the cognitive damage being done and begin by highlighting that by way of an everyday illustrative example.
I have been driving for years. Beyond that skill I know how to refill a car with petrol and unlock the bonnet. I cannot guarantee that I would be able to pop the hood in every car. Changing wheels? Reasonably competent.
When there was an attempt in the UAE to have customers pump their own petrol, there were cases of people not knowing how to do it. Before you laugh at that memory, I confess to being a Luddite, just with different examples. How can this be?
As human beings we can get lazy and forget how things are done. We become dependent, losing our ability in that field of operation that allows a person to be objective. More importantly, we dull our investigative spirit.
A study in June 2025 released by academics at the Massachusetts Institute of Technology focused on the cognitive ability of three groups of people. One was not permitted to use the internet, another was and the last was allowed to use any large language model, AI tool, they desired.
Brain connectivity was analysed and those using AI, on aggregate, had the weakest results. Worse, some struggled to cite their own output when pressed. This makes sense as it was not their work.
Curiosity coupled with cautionary experience have been core elements of what have driven humanity forward for centuries. Are we replacing the bureaucratic buffers born of the memory of errors with an ideocracy that leans into a faceless system?
Risk-averse employees will naturally gravitate towards these solutions. Why wouldn’t they? Management can hardly fire AI, to which all blame will be directed when things go awry.
Ask yourself this: how intelligent is your regulatory regime function? Asked a question, do they respond with a deconstruction of the issue raised? Do they look around the query, teasing out aspects that were not initially considered? By way of a positive feedback loop in their response, is the questioner subconsciously taught to better consider and frame future questions?
Or is their answer delivered with a definitive affirmation, replying in a form that leaves little doubt that its foundation is rock solid. It might have some references to the law – and watch for this – which are particularly detailed in laying out the article, clause and sub clauses. How a solicitor responds formally in writing compared to a tax-advising accountant are akin to different languages.
If you are looking for a cautionary test, the one above would be the first red flag I would notice. It does not mean the advice is wrong, but suggests the source is outside the function and gives no guarantee that the provider truly understood it. Finally, it strongly hints that the issue was not deconstructed and considered.
Maybe it is the right time for a second set of eyes to gauge internal competence? An external provider who has had these concerns highlighted at the time of engagement will likely want to give comfort by spending more time than they might otherwise. The urgency of time and available budget may not always allow for this level of comfort.
Let us look over the fence at where the UAE's Federal Tax Authority has been developing and are deploying AI. Last month, the authority announced what they called “five key AI-driven tax initiatives”. The most interesting, which relates to this article, is their creation of an internal FTAgpt. Aimed at their own employees, this software is to support their ability to respond to external queries.
As anyone who has ever used one of these engines will tell you, learning how to ask questions in the correct manner is imperative to getting a useful result.
The easiest way to understand this is via this simple maths example. 2 * 3 + 4 = 10. However, 2 * (3 + 4) = 14. The adding of round brackets changes what element of the query is resolved first. Likewise with AI, the order and phrasing of a question are imperative.
Were the FTA to offer some guidance, or better still some detailed query-building information, to entities with questions for them, this would help speed up the process, delivering more effective results and welcome outcomes for all.
Company%20Profile
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
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The finalists
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Coach of the Century, 2001-2020: Pep Guardiola (Manchester City), Jose Mourinho (Tottenham Hotspur), Zinedine Zidane (Real Madrid), Sir Alex Ferguson
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hall of shame
SUNDERLAND 2002-03
No one has ended a Premier League season quite like Sunderland. They lost each of their final 15 games, taking no points after January. They ended up with 19 in total, sacking managers Peter Reid and Howard Wilkinson and losing 3-1 to Charlton when they scored three own goals in eight minutes.
SUNDERLAND 2005-06
Until Derby came along, Sunderland’s total of 15 points was the Premier League’s record low. They made it until May and their final home game before winning at the Stadium of Light while they lost a joint record 29 of their 38 league games.
HUDDERSFIELD 2018-19
Joined Derby as the only team to be relegated in March. No striker scored until January, while only two players got more assists than goalkeeper Jonas Lossl. The mid-season appointment Jan Siewert was to end his time as Huddersfield manager with a 5.3 per cent win rate.
ASTON VILLA 2015-16
Perhaps the most inexplicably bad season, considering they signed Idrissa Gueye and Adama Traore and still only got 17 points. Villa won their first league game, but none of the next 19. They ended an abominable campaign by taking one point from the last 39 available.
FULHAM 2018-19
Terrible in different ways. Fulham’s total of 26 points is not among the lowest ever but they contrived to get relegated after spending over £100 million (Dh457m) in the transfer market. Much of it went on defenders but they only kept two clean sheets in their first 33 games.
LA LIGA: Sporting Gijon, 13 points in 1997-98.
BUNDESLIGA: Tasmania Berlin, 10 points in 1965-66
ENGLAND TEAM
Alastair Cook, Mark Stoneman, James Vince, Joe Root (captain), Dawid Malan, Jonny Bairstow, Moeen Ali, Chris Woakes, Craig Overton, Stuart Broad, James Anderson
