The UAE Ministry of Finance has announced significant amendments to three key tax laws—the Tax Procedures Law, VAT Law, and Excise Tax Law—set to take effect on 1 January 2026. These changes represent the most extensive tax procedure updates in recent years and will directly impact how businesses manage refunds, filing deadlines, and compliance obligations.
Key Changes
The amendments address several critical areas:
Tax Procedures Law improvements:
- The Federal Tax Authority now has five years to allocate excess tax credits or overpayments against your liabilities, providing greater clarity on timing.
- Voluntary disclosure rules will be redefined, distinguishing between errors requiring formal disclosure and those correctable in subsequent returns.
- Audit deadlines and the FTA's administrative guidance framework have been revised.
VAT Law refinements:
- Reverse charge simplification: Self-invoicing is no longer required for imports of goods and services for business purposes, reducing administrative burden for cross-border transactions.
- Five-year limit on excess tax recovery: Excess recoverable input tax can now only be carried forward and claimed for five years. Any balance remaining after this period cannot be offset or refunded. A transitional rule allows businesses whose eligibility expires within one year of 1 January 2026 to claim refunds before 1 January 2027.
- Anti-evasion provisions: Three new due diligence requirements strengthen compliance—the FTA can disallow input tax if linked to tax evasion, and businesses must verify the validity of supplies before claiming recovery.
- Statute of limitation alignment: VAT-specific limitation rules now align with the revised Tax Procedures Law, ensuring consistency across frameworks.
What This Means
1. Act now on legacy positions: If your business has excess recoverable input tax accumulated over the past five years, review your position immediately. You may need to claim refunds before the 1 January 2027 deadline to avoid permanent loss of entitlement.
2. Strengthen your due diligence processes: With new anti-evasion provisions in place, ensure your team is verifying supplier credentials and supply chain integrity before claiming input tax recovery. Weak documentation or failure to exercise due diligence could result in denial of recovery claims.
3. Simplify cross-border operations: The removal of self-invoicing requirements for imported goods and services should streamline processes for businesses conducting imports, reducing paperwork and compliance complexity from January 2026 onwards.