UAE VAT Law Amendments Take Effect January 1, 2026 — Key Changes for Your Business

The UAE Ministry of Finance has implemented Federal Decree-Law No. 16 of 2025, bringing significant changes to the Value Added Tax framework effective January 1, 2026. These amendments simplify administrative procedures while introducing stricter compliance controls and new deadlines that every VAT-registered business must understand.

The law removes the requirement for self-invoices when applying the reverse charge mechanism on imports—a key simplification that cuts procedural steps and reduces administrative burden[1]. However, businesses must now maintain detailed supporting documents (invoices, contracts) to provide clear audit evidence[1].

A critical change introduces a five-year deadline for VAT refund claims[1][7]. If your business has unclaimed excess VAT or input tax credits, you must submit refund requests within five years of the relevant tax period. After this window closes, the right to claim expires permanently[7]. Importantly, businesses with claims that expire between January 1, 2026 and December 31, 2026 have a one-year grace period—until December 31, 2026—to file outstanding refunds for tax years 2018–2020[7].

The amendments also strengthen anti-tax-evasion measures. The Federal Tax Authority (FTA) can now deny input tax deductions if the supply is linked to tax evasion and the taxpayer knew—or reasonably should have known—about this connection[1][8]. This places responsibility on businesses to verify the legitimacy of their suppliers before claiming input tax, reinforcing shared compliance responsibility across supply chains[1].

Other changes include removal of the Dh10,000 threshold for claiming input tax on accommodation, simplifying recovery for travel-related expenses[2].

Act now on outstanding refunds: Review your VAT records immediately. If you have unclaimed excess input tax or refunds from 2018–2020, submit your claims before the December 31, 2026 deadline. Missing this window means permanent loss of these rights.

Strengthen supplier compliance: Implement a formal process to verify supplier legitimacy before claiming input tax. The FTA's new guidelines (announced under Article 54 Bis) will clarify requirements, so stay alert for official updates from the FTA.

Update your tax procedures: Ensure your finance team understands the new five-year limitation on refunds and the removal of self-invoicing requirements. Adjust your record-keeping and documentation practices accordingly to maintain robust audit evidence.