On November 25, 2025, the UAE Ministry of Finance announced significant amendments to the Tax Procedures Law and VAT Law, both taking effect January 1, 2026. These changes reshape refund timelines, streamline compliance procedures, and introduce stricter anti-evasion requirements that will affect how businesses manage their tax obligations.
The amendments introduce a 5-year window for refund claims and credit carry-forwards, meaning excess input tax not claimed within five years will be forfeited. This is a critical change for businesses with outstanding VAT credits. The law also simplifies the reverse charge mechanism for imports of goods and services—businesses will no longer need to issue self-invoices for business imports, reducing administrative burden.
On the enforcement side, the amendments strengthen anti-evasion provisions. The Federal Tax Authority (FTA) can now disallow input tax recovery if a supply is linked to tax evasion and the taxpayer knew or should have known about it. This places greater responsibility on businesses to conduct due diligence and verify the validity of supplies before claiming credits. Failure to exercise proper diligence may result in recovery denial.
Additionally, the Tax Procedures Law amendments refine refund and credit allocation processes. The FTA now has a 5-year period to allocate excess tax credits or overpayments against taxpayer liabilities, providing more clarity on tax settlement timelines. Cabinet Decision No. 129 of 2025 also introduces a revised penalty framework effective April 14, 2026, lowering some violations to AED 500 (first violation) and AED 2,000 (repeated violations), replacing the previous penalty structure.
What this means
Audit your VAT credits now. If your business has excess recoverable input tax balances, review them immediately and submit refund claims or offset them against liabilities before the five-year deadline expires. Balances remaining after January 1, 2027, may be lost. Identify which credits fall outside the five-year window and prioritize claims.
Strengthen supply chain due diligence. Update procurement and approval processes to verify supplier legitimacy and transaction validity. Document your compliance checks, as the FTA will expect evidence that you exercised reasonable care before claiming input tax recovery. Consider requiring supplier certifications or compliance attestations.
Streamline reverse charge processes. From January 1, 2026, stop issuing self-invoices for business imports of goods and services. Update your accounting systems and invoice templates, and train finance teams on the simplified procedure to avoid delays and errors.