The UAE Ministry of Finance has announced sweeping amendments to the Tax Procedures Law and VAT Law, effective 1 January 2026. These changes significantly reshape compliance obligations and introduce critical deadlines that business owners must act on now.
The Core Changes
Two new Federal Decree-Laws take effect on 1 January 2026:
VAT Law amendments (Federal Decree-Law No. 16 of 2025) simplify reverse charge procedures and tighten refund rules. Self-invoicing for goods and services imports is no longer required—a welcome relief for businesses handling cross-border transactions. However, excess recoverable input tax can now only be carried forward for five years; any balance unclaimed after that period is forfeited.
Tax Procedures Law amendments (Federal Decree-Law No. 17 of 2025) overhaul refund processes, voluntary disclosure rules, and audit timelines. The FTA gains a five-year window to allocate excess tax credits or overpayments against liabilities, introducing greater predictability for compliance calendars.
Both laws introduce stricter anti-evasion provisions. The FTA can now disallow input tax if a supply is linked to tax evasion and the taxpayer knew or should have known. Businesses must verify the validity of supplies before claiming recovery.
What This Means
Act on old VAT credits now: If your business has unclaimed excess input tax from 2021 or earlier, prioritize refund requests before 1 January 2027. After that transitional window, amounts will begin to expire. Review historical records immediately to identify any dormant balances.
Simplify reverse charge processes: As of 1 January 2026, eliminate self-invoicing requirements for imported goods and services. Update your VAT procedures and systems to reflect the new streamlined approach.
Strengthen your compliance controls: Enhanced due diligence requirements mean you must now document supplier verification and integrity checks. Inadequate record-keeping could result in recovery denial. Review your documentation practices and audit-readiness before year-end.