In this article, Nimish Goel, partner and head of Middle East at Dhruva, examines what the UAE’s maturing fiscal framework means for the hospitality sector.

With over 26,000 new rooms expected through 2026, the growth trajectory is clear across the UAE hospitality and broader investment landscape. Yet behind these numbers sits layered taxation, spanning city levies, e-invoicing, corporate tax and transfer-pricing obligations across hospitality operations.

Taxes that demand precision

Unlike VAT at a uniform 5 percent, municipality fees and tourism charges vary by emirate across the UAE hospitality market. For example, Dubai imposes a 7 percent municipality fee plus a Tourism Dirham of AED 7–20 per room nightly. Meanwhile, Abu Dhabi cut its tourism fee from 6 to 4 percent in 2023 and abolished the AED 15 municipality charge. On the other hand, Sharjah applies 10 percent with no separate tourism tax across hotels, restaurants, resorts and serviced hospitality apartments. Consequently, these levies can inflate a guest’s bill by 20 to 30 percent above the standard base rate for visitors. Whether municipality fees represent direct hotel taxation or indirect guest levies remains unresolved by the Federal Tax Authority (FTA), carrying material VAT implications.

Corporate tax enters its second filing cycle

With the first corporate tax (CT) returns filed in September 2025, hotels are navigating Year Two under greater scrutiny from authorities nationwide. Additionally, the 9 percent CT requires attention to hospitality deductions, while entertainment expenses remain only partially deductible. For international chains, the 15 percent Domestic Minimum Top-up Tax adds complexity for multinational hospitality groups exceeding thresholds since 2025.

Transfer pricing under the spotlight

The FTA’s December 2025 launch of the Advance Pricing Agreement program signals that enforcement is maturing across hospitality operations regionally. Management fees, brand royalties, service recharges and secondment costs between property owners and operators must satisfy the arm’s-length principle. Furthermore, businesses exceeding AED 200 million in revenue must maintain Master and Local Files, producible within 30 days upon request. Excess payments failing the arm’s-length test risk being disallowed as deductions during regulatory reviews and future CT assessments.

Compliance as competitive advantage

Abu Dhabi’s fee simplification supported stronger RevPAR growth alongside Tourism Strategy 2030 initiatives and international destination marketing efforts during 2025. With mandatory e-invoicing approaching, calibrated tax policy and stronger compliance increasingly support sustainable hospitality growth across the emirates from 2026 onward. Ultimately, tax complexity within hospitality markets deepens, widening gaps between operators proactively preparing and others reacting slowly.