The UAE has introduced significant amendments to its corporate tax, VAT, and Commercial Companies Law, effective January 1, 2026. These changes aim to simplify business operations, remove regulatory ambiguities, and clarify how companies calculate and settle tax liabilities.
Key Changes at a Glance
Corporate Tax Amendments
The government has provided detailed guidance on settling tax liabilities when credits, incentives, or reliefs apply. Credits will now be applied in a strict order: withholding tax credits first, followed by foreign tax credits, then any Cabinet-approved incentives or reliefs. Any remaining corporate tax must be paid. Importantly, taxpayers can now claim refunds for unused tax credits, provided they follow specified timelines and procedures. The 9% corporate tax rate (on profits above AED 375,000) and zero percent threshold remain unchanged.
VAT Simplifications
Under Federal Decree Law No. 16 of 2025, businesses no longer need to issue self-invoices under the reverse charge mechanism if they keep supporting documentation. A new five-year time limit has been introduced for submitting claims to recover excess refundable VAT, giving companies clear deadlines for managing tax recoveries.
Commercial Companies Law Flexibility
The amendments introduce non-profit company structures, allowing organizations to reinvest net profits without distributing them to shareholders. Companies can now issue multiple classes of shares with different rights for voting, profit distribution, redemption, and liquidation—a significant expansion of corporate flexibility that was previously unavailable for most private entities.
What This Means
- Tax Planning Just Got Clearer: The prescribed order for applying credits and incentives removes previous uncertainties, making tax planning more predictable and reducing disputes with tax authorities.
- Tighter Timelines for Refunds: The five-year window for claiming VAT refunds is now legally fixed. Review historical filings immediately to ensure no refunds slip through due to missed deadlines.
- More Flexibility in Corporate Structure: If you're considering restructuring your business—whether to establish a non-profit arm or offer different classes of shares to investors—these amendments now make that possible without liquidation or lengthy bureaucratic processes.