The UAE has implemented significant amendments to its VAT regulations, effective January 1, 2026, introducing stricter compliance requirements, new refund deadlines, and streamlined procedures. These changes, outlined in Federal Decree-Law No. 16 of 2025 (VAT Law) and Federal Decree-Law No. 17 of 2025 (Tax Procedures Law), reshape how businesses manage refunds, verify supplier legitimacy, and correct tax errors.
Key Changes for Your Business
Five-Year Refund Deadline
The most critical change for cash flow management: excess input tax can now only be carried forward for five years from the end of the tax period in which it arose.[1] After this deadline expires, you cannot claim refunds or offset the credit. If your business has outstanding refund claims dating back several years, review them immediately—you have until January 1, 2027 to request refunds for balances that would otherwise expire under the new rules.[2]
Simpler Invoice Requirements for Imports
Businesses importing goods and services under the reverse charge mechanism no longer need to self-issue invoices.[1] Instead, you must retain supporting documents (original invoices or contracts) and submit a declaration when claiming input tax. This reduces paperwork while maintaining audit evidence.
Tougher Supplier Due Diligence Rules
The Federal Tax Authority can now deny input tax deductions if a supply is linked to tax evasion—even if you didn't directly intend fraud.[2] You are expected to verify the validity and integrity of your suppliers before claiming input tax. "Should have known" applies: if circumstances suggest an issue but you failed to investigate, you may lose deductions.[3]
Easier Error Corrections (In Some Cases)
Voluntary Disclosures are no longer required for every error. Minor mistakes that don't change your tax liability can now be corrected directly in your tax return, simplifying compliance.[2]
What This Means
- Act on old refunds now. Review any outstanding VAT credit balances or refund claims from 2021 or earlier and decide whether to claim or offset them before January 1, 2027. After this date, expired credits cannot be recovered.
- Strengthen supplier vetting. Implement documented checks on your suppliers' legitimacy and tax compliance. The burden is on you to prove due diligence if the FTA challenges a transaction. Maintain clear records of how you verified each supplier.
- Plan your filing calendar. With the five-year deadline now in place and clearer rules on voluntary disclosures, integrate refund and credit management into your regular accounting cycle rather than treating it as an afterthought.