The UAE Ministry of Finance has introduced significant amendments to its Value Added Tax (VAT) framework, effective January 1, 2026, through Federal Decree-Law No. 16 of 2025. These changes aim to streamline tax procedures, enhance compliance, and align the UAE's tax system with global standards.
Key Changes
Removal of self-invoicing requirement
Businesses importing goods and services no longer need to issue self-invoices when applying the reverse charge mechanism. Instead, they must retain supporting documents such as invoices or contracts. This reduces procedural steps and provides clearer audit evidence.
Five-year deadline for VAT refund claims
A critical change introduces a five-year time limit for claiming excess recoverable input tax and refundable VAT balances. Any claims submitted after this deadline will not be accepted. This applies from the end of the relevant tax period.
Transitional relief for expired claims
Businesses with refund claims that have already expired or will expire within one year of January 1, 2026, have until December 31, 2026, to submit outstanding refund requests for tax years 2018–2020. After this date, rights to these refunds will be permanently forfeited.
Greater flexibility in correcting minor errors
The amendments relax mandatory voluntary disclosure requirements. Minor inaccuracies that do not impact the amount of tax due can now be corrected directly through a tax return, rather than requiring formal voluntary disclosure.
What this means
- Act immediately on old refunds: If your business has unclaimed VAT credits from 2018–2020 or any refund claim nearing expiration, submit requests through the EmaraTax portal before December 31, 2026, or lose the right permanently.
- Simplify import compliance: Eliminate the administrative burden of self-invoicing for reverse charge transactions—focus instead on maintaining organized supporting documentation.
- Plan ahead for credit management: Track excess input tax balances carefully. Any credit remaining after five years from the end of the relevant tax period cannot be carried forward, offset, or refunded.