UAE Unveils Updated, Simplified VAT Framework Effective January 2026

The UAE has announced significant updates to its Value Added Tax (VAT) framework, with new rules set to take effect from January 1, 2026. Issued under Federal Decree-Law No. (16) of 2025, the amendments refine key provisions of the original 2017 VAT law as part of the nation’s broader efforts to advance its tax system and enhance administrative efficiency.

A central objective of the revisions is to make tax compliance more straightforward while maintaining transparency and alignment with international standards. One of the notable changes removes the requirement for taxable persons to issue self-invoices when applying the reverse charge mechanism. Instead, businesses must retain relevant supporting documents for supply transactions, as outlined in the Executive Regulation. This shift eases procedural obligations, strengthens audit clarity, and reduces administrative burdens.

The amendments also introduce a five-year limitation for submitting requests to reclaim excess refundable tax following reconciliation. After this period, the right to recover the amount lapses. The measure is designed to prevent the accumulation of outdated balances, enhance certainty for taxpayers, and uphold fairness in line with global best practices for refund management.

Further, in a decisive step to deter tax evasion, the Federal Tax Authority (FTA) is empowered to deny input tax deductions if it determines that a supply is linked to an evasion arrangement. Taxpayers must therefore ensure the authenticity and integrity of their transactions before claiming input tax, following the procedures established by the FTA. This reinforces shared responsibility across the supply chain, enhances governance, and protects public revenue.

The Ministry of Finance highlighted that these updates reflect the UAE’s commitment to building a transparent, efficient, and resilient tax system. By strengthening compliance, improving administrative processes, and safeguarding public funds, the amendments support long-term economic sustainability and enhance the competitiveness of the national economy.

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