diff --git a/tests/actions/PolicyTagTest.ts b/tests/actions/PolicyTagTest.ts
new file mode 100644
index 000000000000..ff4439c392fa
--- /dev/null
+++ b/tests/actions/PolicyTagTest.ts
@@ -0,0 +1,769 @@
+import Onyx from 'react-native-onyx';
+import OnyxUpdateManager from '@libs/actions/OnyxUpdateManager';
+import * as Policy from '@libs/actions/Policy';
+import CONST from '@src/CONST';
+import ONYXKEYS from '@src/ONYXKEYS';
+import type {PolicyTags} from '@src/types/onyx';
+import createRandomPolicy from '../utils/collections/policies';
+import createRandomPolicyTags from '../utils/collections/policyTags';
+import * as TestHelper from '../utils/TestHelper';
+import waitForBatchedUpdates from '../utils/waitForBatchedUpdates';
+
+OnyxUpdateManager();
+describe('actions/Policy', () => {
+    beforeAll(() => {
+        Onyx.init({
+            keys: ONYXKEYS,
+        });
+    });
+
+    beforeEach(() => {
+        // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+        global.fetch = TestHelper.getGlobalFetchMock();
+        return Onyx.clear().then(waitForBatchedUpdates);
+    });
+
+    describe('SetPolicyRequiresTag', () => {
+        it('enable require tag', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.requiresTag = false;
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Policy.setPolicyRequiresTag(fakePolicy.id, true);
+                        return waitForBatchedUpdates();
+                    })
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policy) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        // RequiresTag is enabled and pending
+                                        expect(policy?.requiresTag).toBeTruthy();
+                                        expect(policy?.pendingFields?.requiresTag).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policy) => {
+                                        Onyx.disconnect(connectionID);
+                                        expect(policy?.pendingFields?.requiresTag).toBeFalsy();
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+
+        it('disable require tag', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.requiresTag = true;
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Policy.setPolicyRequiresTag(fakePolicy.id, false);
+                        return waitForBatchedUpdates();
+                    })
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policy) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        // RequiresTag is disabled and pending
+                                        expect(policy?.requiresTag).toBeFalsy();
+                                        expect(policy?.pendingFields?.requiresTag).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policy) => {
+                                        Onyx.disconnect(connectionID);
+                                        expect(policy?.pendingFields?.requiresTag).toBeFalsy();
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+
+        it('reset require tag when api returns an error', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.requiresTag = true;
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                        fetch.fail();
+                        Policy.setPolicyRequiresTag(fakePolicy.id, false);
+                        return waitForBatchedUpdates();
+                    })
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policy) => {
+                                        Onyx.disconnect(connectionID);
+                                        expect(policy?.pendingFields?.requiresTag).toBeFalsy();
+                                        expect(policy?.errors).toBeTruthy();
+                                        expect(policy?.requiresTag).toBeTruthy();
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+    });
+
+    describe('RenamePolicyTaglist', () => {
+        it('rename policy tag list', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const oldTagListName = 'Old tag list name';
+            const newTagListName = 'New tag list name';
+            const fakePolicyTags = createRandomPolicyTags(oldTagListName);
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        Policy.renamePolicyTaglist(
+                            fakePolicy.id,
+                            {
+                                oldName: oldTagListName,
+                                newName: newTagListName,
+                            },
+                            fakePolicyTags,
+                        );
+                        return waitForBatchedUpdates();
+                    })
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        // Tag list name is updated and pending
+                                        expect(Object.keys(policyTags?.[oldTagListName] ?? {}).length).toBe(0);
+                                        expect(policyTags?.[newTagListName]?.name).toBe(newTagListName);
+                                        expect(policyTags?.[newTagListName]?.pendingAction).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.ADD);
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        expect(policyTags?.[newTagListName]?.pendingAction).toBeFalsy();
+                                        expect(Object.keys(policyTags?.[oldTagListName] ?? {}).length).toBe(0);
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+
+        it('reset the policy tag list name when api returns error', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const oldTagListName = 'Old tag list name';
+            const newTagListName = 'New tag list name';
+            const fakePolicyTags = createRandomPolicyTags(oldTagListName);
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                        fetch.fail();
+
+                        Policy.renamePolicyTaglist(
+                            fakePolicy.id,
+                            {
+                                oldName: oldTagListName,
+                                newName: newTagListName,
+                            },
+                            fakePolicyTags,
+                        );
+                        return waitForBatchedUpdates();
+                    })
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        expect(policyTags?.[newTagListName]).toBeFalsy();
+                                        expect(policyTags?.[oldTagListName]).toBeTruthy();
+                                        expect(policyTags?.errors).toBeTruthy();
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+    });
+
+    describe('CreatePolicyTag', () => {
+        it('create new policy tag', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const tagListName = 'Fake tag';
+            const newTagName = 'new tag';
+            const fakePolicyTags = createRandomPolicyTags(tagListName);
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        Policy.createPolicyTag(fakePolicy.id, newTagName);
+                        return waitForBatchedUpdates();
+                    })
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        const newTag = policyTags?.[tagListName]?.tags?.[newTagName];
+                                        expect(newTag?.name).toBe(newTagName);
+                                        expect(newTag?.enabled).toBe(true);
+                                        expect(newTag?.errors).toBeFalsy();
+                                        expect(newTag?.pendingAction).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.ADD);
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        const newTag = policyTags?.[tagListName]?.tags?.[newTagName];
+                                        expect(newTag?.errors).toBeFalsy();
+                                        expect(newTag?.pendingAction).toBeFalsy();
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+
+        it('reset new policy tag when api returns error', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const tagListName = 'Fake tag';
+            const newTagName = 'new tag';
+            const fakePolicyTags = createRandomPolicyTags(tagListName);
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                        fetch.fail();
+
+                        Policy.createPolicyTag(fakePolicy.id, newTagName);
+                        return waitForBatchedUpdates();
+                    })
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        const newTag = policyTags?.[tagListName]?.tags?.[newTagName];
+                                        expect(newTag?.errors).toBeTruthy();
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+    });
+
+    describe('SetPolicyTagsEnabled', () => {
+        it('set policy tag enable', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const tagListName = 'Fake tag';
+            const fakePolicyTags = createRandomPolicyTags(tagListName, 2);
+            const tagsToUpdate = Object.keys(fakePolicyTags?.[tagListName]?.tags ?? {}).reduce<PolicyTags>((acc, key) => {
+                acc[key] = {
+                    name: fakePolicyTags?.[tagListName]?.tags[key].name,
+                    enabled: false,
+                };
+                return acc;
+            }, {});
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        Policy.setWorkspaceTagEnabled(fakePolicy.id, tagsToUpdate);
+                        return waitForBatchedUpdates();
+                    })
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        Object.keys(tagsToUpdate).forEach((key) => {
+                                            const updatedTag = policyTags?.[tagListName]?.tags[key];
+                                            expect(updatedTag?.enabled).toBeFalsy();
+                                            expect(updatedTag?.errors).toBeFalsy();
+                                            expect(updatedTag?.pendingAction).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+                                            expect(updatedTag?.pendingFields?.enabled).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+                                        });
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        Object.keys(tagsToUpdate).forEach((key) => {
+                                            const updatedTag = policyTags?.[tagListName]?.tags[key];
+                                            expect(updatedTag?.errors).toBeFalsy();
+                                            expect(updatedTag?.pendingAction).toBeFalsy();
+                                            expect(updatedTag?.pendingFields?.enabled).toBeFalsy();
+                                        });
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+
+        it('reset policy tag enable when api returns error', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const tagListName = 'Fake tag';
+            const fakePolicyTags = createRandomPolicyTags(tagListName, 2);
+            const tagsToUpdate = Object.keys(fakePolicyTags?.[tagListName]?.tags ?? {}).reduce<PolicyTags>((acc, key) => {
+                acc[key] = {
+                    name: fakePolicyTags?.[tagListName]?.tags[key].name,
+                    enabled: false,
+                };
+                return acc;
+            }, {});
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                        fetch.fail();
+
+                        Policy.setWorkspaceTagEnabled(fakePolicy.id, tagsToUpdate);
+                        return waitForBatchedUpdates();
+                    })
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        Object.keys(tagsToUpdate).forEach((key) => {
+                                            const updatedTag = policyTags?.[tagListName]?.tags[key];
+                                            expect(updatedTag?.errors).toBeTruthy();
+                                            expect(updatedTag?.pendingAction).toBeFalsy();
+                                            expect(updatedTag?.pendingFields?.enabled).toBeFalsy();
+                                        });
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+    });
+
+    describe('RenamePolicyTag', () => {
+        it('rename policy tag', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const tagListName = 'Fake tag';
+            const fakePolicyTags = createRandomPolicyTags(tagListName, 2);
+            const oldTagName = Object.keys(fakePolicyTags?.[tagListName]?.tags)[0];
+            const newTagName = 'New tag';
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        Policy.renamePolicyTag(fakePolicy.id, {
+                            oldName: oldTagName,
+                            newName: newTagName,
+                        });
+                        return waitForBatchedUpdates();
+                    })
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        const tags = policyTags?.[tagListName]?.tags;
+                                        expect(tags?.[oldTagName]).toBeFalsy();
+                                        expect(tags?.[newTagName]?.name).toBe(newTagName);
+                                        expect(tags?.[newTagName]?.pendingAction).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+                                        expect(tags?.[newTagName]?.pendingFields?.name).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        const tags = policyTags?.[tagListName]?.tags;
+                                        expect(tags?.[newTagName]?.pendingAction).toBeFalsy();
+                                        expect(tags?.[newTagName]?.pendingFields?.name).toBeFalsy();
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+
+        it('reset policy tag name when api returns error', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const tagListName = 'Fake tag';
+            const fakePolicyTags = createRandomPolicyTags(tagListName, 2);
+            const oldTagName = Object.keys(fakePolicyTags?.[tagListName]?.tags)[0];
+            const newTagName = 'New tag';
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                        fetch.fail();
+
+                        Policy.renamePolicyTag(fakePolicy.id, {
+                            oldName: oldTagName,
+                            newName: newTagName,
+                        });
+                        return waitForBatchedUpdates();
+                    })
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        const tags = policyTags?.[tagListName]?.tags;
+                                        expect(tags?.[newTagName]).toBeFalsy();
+                                        expect(tags?.[oldTagName]?.errors).toBeTruthy();
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+    });
+
+    describe('DeletePolicyTags', () => {
+        it('delete policy tag', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const tagListName = 'Fake tag';
+            const fakePolicyTags = createRandomPolicyTags(tagListName, 2);
+            const tagsToDelete = Object.keys(fakePolicyTags?.[tagListName]?.tags ?? {});
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        Policy.deletePolicyTags(fakePolicy.id, tagsToDelete);
+                        return waitForBatchedUpdates();
+                    })
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        tagsToDelete.forEach((tagName) => {
+                                            expect(policyTags?.[tagListName]?.tags[tagName]?.pendingAction).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.DELETE);
+                                        });
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        tagsToDelete.forEach((tagName) => {
+                                            expect(policyTags?.[tagListName]?.tags[tagName]).toBeFalsy();
+                                        });
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+
+        it('reset the deleted policy tag when api returns error', () => {
+            const fakePolicy = createRandomPolicy(0);
+            fakePolicy.areTagsEnabled = true;
+
+            const tagListName = 'Fake tag';
+            const fakePolicyTags = createRandomPolicyTags(tagListName, 2);
+            const tagsToDelete = Object.keys(fakePolicyTags?.[tagListName]?.tags ?? {});
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+
+            return (
+                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                    .then(() => {
+                        Onyx.set(`${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`, fakePolicyTags);
+                    })
+                    .then(() => {
+                        // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                        fetch.fail();
+
+                        Policy.deletePolicyTags(fakePolicy.id, tagsToDelete);
+                        return waitForBatchedUpdates();
+                    })
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    .then(fetch.resume)
+                    .then(waitForBatchedUpdates)
+                    .then(
+                        () =>
+                            new Promise<void>((resolve) => {
+                                const connectionID = Onyx.connect({
+                                    key: `${ONYXKEYS.COLLECTION.POLICY_TAGS}${fakePolicy.id}`,
+                                    waitForCollectionCallback: false,
+                                    callback: (policyTags) => {
+                                        Onyx.disconnect(connectionID);
+
+                                        tagsToDelete.forEach((tagName) => {
+                                            expect(policyTags?.[tagListName]?.tags[tagName].pendingAction).toBeFalsy();
+                                            expect(policyTags?.[tagListName]?.tags[tagName].errors).toBeTruthy();
+                                        });
+
+                                        resolve();
+                                    },
+                                });
+                            }),
+                    )
+            );
+        });
+    });
+});
diff --git a/tests/utils/collections/policyTags.ts b/tests/utils/collections/policyTags.ts
new file mode 100644
index 000000000000..ed5bbd7efda4
--- /dev/null
+++ b/tests/utils/collections/policyTags.ts
@@ -0,0 +1,22 @@
+import {randWord} from '@ngneat/falso';
+import type {PolicyTagList, PolicyTags} from '@src/types/onyx';
+
+export default function createRandomPolicyTags(tagListName: string, numberOfTags = 0): PolicyTagList {
+    const tags: PolicyTags = {};
+    for (let i = 0; i < numberOfTags; i++) {
+        const tagName = randWord();
+        tags[tagName] = {
+            name: tagName,
+            enabled: true,
+        };
+    }
+
+    return {
+        [tagListName]: {
+            name: tagListName,
+            orderWeight: 0,
+            required: false,
+            tags,
+        },
+    };
+}