UAE VAT Law Changes Now in Effect: Key Compliance Updates for 2026

The UAE's Federal Decree-Law No. 16 of 2025 introduced significant amendments to the Value Added Tax framework effective January 1, 2026. These changes are designed to streamline compliance procedures, enhance transparency, and strengthen governance across the tax system.

Three major updates now apply to all UAE businesses:

Simplified reverse charge procedures: Taxable persons no longer need to issue self-invoices when applying the reverse charge mechanism for imports of goods and services. Instead, businesses must retain supporting documents such as invoices or contracts. This removes a procedural step while maintaining audit evidence and compliance transparency.

Five-year refund deadline: Excess recoverable input VAT can now be carried forward and claimed only within five years from the end of the relevant tax period. Any balance remaining after this period expires cannot be offset or refunded. Importantly, businesses whose refund eligibility expired or will expire within one year of January 1, 2026, have until December 31, 2026, to submit a refund request for outstanding credits from 2018–2020.

Stricter input tax verification: The Federal Tax Authority is authorized to deny input tax deductions if a supply is linked to a tax-evasion arrangement. Businesses must verify the legitimacy of supplies before claiming input VAT and maintain strong compliance systems and supplier due diligence.

Act immediately on outstanding refunds: If your business has unclaimed VAT credits or excess recoverable input tax from 2018–2020, you must submit a refund request before December 31, 2026. Failure to do so will result in permanent forfeiture of these amounts.

Review supplier documentation and compliance: Strengthen your record-keeping for reverse charge transactions and ensure you can demonstrate the legitimacy of all suppliers before claiming input tax deductions. The FTA's enhanced enforcement authority means non-compliance carries greater risk.

Plan for the new five-year cycle: Going forward, track excess VAT refunds carefully and establish processes to claim them within the five-year window to avoid losing cash flow opportunities.