The UAE Ministry of Finance has announced significant amendments to Value Added Tax law, effective from 1 January 2026. These changes streamline administrative procedures while introducing stricter compliance rules designed to enhance transparency and combat tax evasion.
Key Changes
Simplified Reverse Charge Process
Businesses will no longer need to issue self-invoices when applying the reverse charge mechanism. Instead, you must retain supporting documentation for the underlying supplies as specified in the Executive Regulation. This reduces paperwork while providing clear audit evidence.
New Refund Time Limit
A five-year deadline now applies to all refund requests for excess refundable tax after reconciliation. Once this period expires, your right to reclaim the tax expires. This prevents indefinite accumulation of VAT credit balances and strengthens financial certainty.
Anti-Evasion Measures
The Federal Tax Authority now has the power to deny input tax deductions if a supply is deemed part of a tax-evasion arrangement. You will need to verify the legitimacy and integrity of supplies before claiming input tax.
What this means
- Act now on old VAT credits: If you have outstanding VAT refund claims from 2018–2020 or earlier, prioritize submitting them before the five-year deadline expires. Many businesses face an extended transitional window until 31 December 2026.
- Strengthen supplier due diligence: Review your supply chain and ensure you can document the legitimacy of major suppliers. The FTA's enhanced enforcement powers make it essential to maintain robust audit trails.
- Simplify your reverse charge administration: Shifting from self-invoices to supporting documentation should reduce your compliance burden, but ensure your record-keeping systems are properly organized to meet FTA requirements.