Law Firm in Dubai Provides Sector-Specific Legal News Update for UAE

The oil, gas, and real estate sectors in the UAE are shaped by recent amendments to Federal Decree-Law No. 8 of 2017 on VAT, updates to Federal Law No. 5 of 1985 on Civil Transactions, and new RERA directives, which together form the governing legal framework across all Emirates and directly impact contracts, taxation, and buyer protections.

Related Services: Explore our Corporate Governance Advisory and Real Estate Law Advisory services for practical legal support in this area.

WHAT RECENT VAT CHANGES IMPACT OIL AND GAS CONTRACTS IN THE UAE?

The Federal Tax Authority (FTA) issued Decision No. 23 of 2023 to clarify the scope of zero-rating for hydrocarbons under Article 45 of the VAT Law. According to the decision, the supply of crude oil and natural gas remains zero-rated, while ancillary services-such as drilling, well-maintenance, pipeline transportation, and related engineering support-are subject to the standard 5 % VAT rate. Consequently, upstream exploration and production activities retain their zero-rating benefit, whereas downstream service contracts must now incorporate VAT on invoices issued after 1 January 2024.

For companies, this distinction requires a systematic review of supply chains to segregate zero-rated goods from taxable services. Accounting systems should be updated to apply the correct tax code at the point of invoicing, and supporting documentation-including customs declarations, service agreements, and certificates of origin-must be retained to substantiate zero-rating claims during FTA audits. Misapplication can trigger administrative penalties of up to 50 % of the unpaid tax under Article 66 of the VAT Law, underscoring the importance of precise contract language that explicitly states the tax treatment of each deliverable.

HOW DO NEW RERA REGULATIONS AFFECT OFF-PLAN REAL ESTATE SALES IN DUBAI?

RERA's Circular No. 12 of 2023 introduces stricter escrow-account requirements for developers launching off-plan projects. Before any marketing or sales activity can commence, developers must obtain a revised escrow-account approval from the Dubai Land Department (DLD), ensuring that buyer funds are held in a regulated account managed by an approved bank. The circular also mandates the submission of a detailed construction schedule, quarterly progress reports verified by an independent engineer, and a twelve-month defects liability period following handover.

For buyers, these measures enhance protection against project delays, insolvency, and construction defects, as escrow funds can only be released upon milestone certification. Developers must provide updated project plans, financial guarantees, and bank guarantees to the DLD within thirty days of receiving the circular; non-compliance may attract fines ranging from AED 50,000 to AED 200,000 per violation under Article 9 of Real Estate Regulatory Agency Law No. 8 of 2007. Legal counsel should verify that sale and purchase agreements incorporate the revised escrow clauses, that disclosure documents reflect the new reporting obligations, and that any amendments are duly registered with the DLD to avoid disputes or regulatory sanctions.

WHAT IMPACT DOES THE AMENDED CIVIL TRANSACTIONS LAW HAVE ON JOINT VENTURE AGREEMENTS IN THE UAE?

Recent amendments to Federal Law No. 5 of 1985 on the Civil Transactions Law reinforce the principle of contractual freedom while introducing clearer provisions on the interpretation of ambiguous terms and the enforcement of penalty clauses. For joint venture (JV) agreements, the updated law clarifies that parties may expressly allocate risks and rewards through detailed capital contribution schedules, profit-sharing mechanisms, and exit provisions, provided that such allocations do not contravene public policy or mandatory provisions of the law.

The amendment also strengthens the doctrine of good faith, requiring parties to act honestly and cooperatively throughout the life of the JV. This heightened standard influences dispute-resolution mechanisms, making it advisable for JV agreements to incorporate explicit governance structures-such as board composition, voting thresholds, and deadlock-resolution procedures-to demonstrate compliance with the good-faith requirement. Legal practitioners should review existing JV contracts to ensure that any vague language is replaced with precise definitions and that the agreement reflects the updated statutory expectations.

HOW ARE M&A TRANSACTIONS ADAPTING TO THE LATEST CORPORATE GOVERNANCE ADVISORY REQUIREMENTS IN THE UAE?

The UAE's corporate governance framework has been refined through updated guidelines from the Securities and Commodities Authority (SCA) and the Dubai Financial Services Authority (DFSA), particularly for companies listed on the Dubai Financial Market (DFM) or operating within the Dubai International Financial Centre (DIFC). These advisories emphasize enhanced board independence, stricter related-party transaction disclosures, and the establishment of robust risk-management committees.

In the context of mergers and acquisitions (M&A), buyers and sellers must now conduct more thorough due diligence that includes a review of the target's governance structures, compliance with the new disclosure norms, and any potential conflicts of interest that could affect post-closing integration. Transaction documents frequently incorporate representations and warranties concerning the target's adherence to the updated governance standards, as well as indemnities for breaches that arise after completion. Legal advisors play a critical role in drafting these provisions, ensuring that they align with both the substantive requirements of the UAE Companies Law and the procedural expectations of the relevant regulatory authorities.

WHAT DUE-DILIGENCE CONSIDERATIONS ARISE FROM THE NEW LEGAL AND FINANCIAL AUDIT OBLIGATIONS IN THE UAE?

Federal Decree-Law No. 26 of 2020 on the Regulation of Auditing Profession, together with recent guidance from the Ministry of Economy, has expanded the scope of mandatory legal and financial audits for certain categories of companies, including those engaged in oil and gas exploration, large-scale real-estate development, and entities with cross-border transactions. The updated regime requires auditors to assess not only financial statements but also compliance with sector-specific regulations, such as VAT treatment, environmental obligations, and RERA escrow rules.

For businesses, this means that due-diligence processes must now incorporate a review of the target's audit reports, management letters, and any remedial action plans issued by auditors. Companies should also verify that internal controls are designed to capture the data necessary for these expanded audit scopes, including tax invoices, service contracts, and escrow-account statements. Engaging legal counsel early in the audit preparation phase can identify gaps, align documentation with regulatory expectations, and reduce the risk of adverse findings that could affect valuation or transaction timelines.

HOW DO ARBITRATION AND DISPUTE-RESOLUTION MECHANISMS EVOLVE FOR COMMERCIAL CONTRACTS IN DUBAI?

Dubai's position as an arbitration hub continues to be reinforced by updates to the DIFC Arbitration Law, the DIAC Arbitration Rules, and the UAE Federal Arbitration Law. Recent amendments emphasize confidentiality, the enforceability of emergency arbitrator orders, and the recognition of third-party funding arrangements. For commercial contracts-particularly those in the oil, gas, and real-estate sectors-parties are increasingly opting for arbitration clauses that specify DIAC or DIFC as the administering institution, with the seat of arbitration set in Dubai.

These developments affect contract drafting in several ways: parties must clearly define the scope of arbitrable disputes, select the applicable procedural rules, and address issues such as the language of proceedings, the number of arbitrators, and the allocation of costs. Additionally, the growing acceptance of virtual hearings and electronic evidence submission necessitates that contracts include provisions for technological infrastructure and data protection. Legal practitioners should ensure that arbitration clauses are compatible with the underlying substantive law governing the contract and that they reflect the latest institutional practices to maximize enforceability and efficiency.

WHAT ROLE DOES LEGAL AND FINANCIAL AUDIT PLAY IN CORPORATE RESTRUCTURING INITIATIVES IN THE UAE?

Corporate restructuring-whether driven by debt refinancing, shareholder realignment, or strategic divestitures-requires a comprehensive assessment of the entity's financial health and legal compliance. The updated legal and financial audit obligations mandate that auditors examine the validity of contingent liabilities, the accuracy of asset valuations, and adherence to sector-specific regulations such as those governing oil-field concessions or real-estate development permits.

During a restructuring, auditors often work alongside legal advisors to identify any regulatory breaches that could impede court-approved schemes of arrangement or creditor-compromise agreements. The audit findings inform the preparation of disclosure statements, the valuation of assets for distribution, and the formulation of restructuring plans that satisfy both creditor interests and statutory requirements. By integrating legal and financial audit outcomes early in the process, companies can streamline court proceedings, reduce the likelihood of objections, and enhance the prospects of a successful restructuring outcome.

FREQUENTLY ASKED QUESTIONS

What recent VAT changes affect upstream versus downstream oil and gas activities in the UAE?

The FTA's Decision No. 23 of 2023 clarifies that crude oil and natural gas remain zero-rated under Article 45 of the VAT Law, while ancillary services such as drilling, well-maintenance, pipeline transportation, and related engineering support are subject to the standard 5 % VAT. Upstream exploration and production retain zero-rating, whereas downstream service contracts issued after 1 January 2024 must now include VAT on invoices.

How does RERA's Circular No. 12 of 2023 protect buyers of off-plan properties in Dubai?

The circular requires developers to obtain revised escrow-account approval before any marketing or sales, mandates detailed construction schedules, quarterly progress reports verified by an independent engineer, and a twelve-month defects liability period. Buyers benefit because escrow funds can be released only upon milestone certification, enhancing protection against delays, insolvency, and construction defects.

What effect do the amendments to Federal Law No. 5 of 1985 (Civil Transactions Law) have on joint venture agreements?

The amendments reinforce contractual freedom while clarifying interpretation of ambiguous terms and enforcement of penalty clauses. Parties may expressly allocate risks and rewards through capital contribution schedules, profit-sharing mechanisms, and exit provisions, provided they do not violate public policy. The law also strengthens the good-faith doctrine, advising JV agreements to include explicit governance structures to demonstrate compliance.

How are M&A transactions in the UAE adapting to updated corporate governance advisories?

Updated SCA and DFSA guidelines stress board independence, stricter related-party transaction disclosures, and robust risk-management committees. Consequently, M&A due diligence now includes review of the target's governance structures, compliance with disclosure norms, and potential conflicts of interest. Transaction documents frequently contain representations, warranties, and indemnities concerning adherence to these governance standards.

What due-diligence considerations arise from the expanded legal and financial audit obligations under Federal Decree-Law No. 26 of 2020?

The audit regime now requires assessment of compliance with sector-specific regulations such as VAT treatment, environmental obligations, and RERA escrow rules, in addition to financial statements. Due-diligence must review audit reports, management letters, remedial action plans, and verify that internal controls capture necessary data like tax invoices, service contracts, and escrow-account statements to avoid adverse findings affecting valuation or timelines.

If your matter involves legal news in the United Arab Emirates, you are welcome to request a consultation with Nour Attorneys. Our team can assess your position under the law currently in force and outline the options available to you. Request a consultation

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