The UAE Ministry of Finance has introduced two significant legislative updates to the country's tax framework, both effective from January 1, 2026. Federal Decree-Law No. 16 of 2025 amends the VAT Law, while Federal Decree-Law No. 17 of 2025 reforms the Tax Procedures Law—marking the most substantial tax compliance changes in recent years.
Key Changes to VAT Compliance
The VAT Law amendments simplify some procedures while introducing stricter controls. Self-invoicing requirements for imported goods and services used for business purposes have been eliminated, reducing administrative burden for businesses engaged in cross-border transactions. However, businesses must now act urgently on excess input tax claims: a new five-year limit means any excess recoverable input tax not claimed within five years of the relevant tax period will be permanently forfeited. Additionally, new anti-tax-evasion rules now require businesses to verify the validity and integrity of supplies before claiming input tax credits—failure to conduct proper supplier due diligence could result in denied deductions.
Significant Changes to Tax Procedures
The Tax Procedures Law amendments reshape refund timelines, audit windows, and compliance obligations. The Federal Tax Authority (FTA) now has five years to allocate excess tax credits or overpayments against taxpayer liabilities. Voluntary Disclosure requirements have been streamlined—the FTA will now specify which errors require formal disclosure and which can be corrected through amended returns. Importantly, there is a transitional relief window: businesses with expired or expiring five-year refund claims can submit requests until December 31, 2026, effectively giving until year-end to claim outstanding refunds for tax years 2018–2020.
Audit rights have been extended in certain cases: if a taxpayer submits a VAT refund claim in the fifth year of the standard audit period, the FTA gains an additional two years to audit that claim.
What this means
- Act immediately on old refunds: Review all excess input tax balances and outstanding refund claims from 2018 onwards. Submit any outstanding requests by December 31, 2026, or lose the right to claim permanently.
- Strengthen supplier compliance: Implement proper due diligence procedures to verify suppliers' VAT registration and transaction validity before claiming input tax. Documentation of these checks is now essential.
- Plan for longer audit exposure: If you plan to submit a refund claim near the end of an audit period, be prepared for potential FTA scrutiny extending two years beyond the standard five-year window.