Major Update to UAE VAT Law

Dubai: The UAE Ministry of Finance has issued a new federal decree updating several key parts of the country’s Value Added Tax (VAT) law. These new regulations will officially come into force on January 1, 2026.
The update aims to make the UAE’s tax system simpler, more efficient, and fully aligned with global standards.

According to the Ministry, the changes support the UAE’s ongoing efforts to improve tax transparency, strengthen administrative efficiency, and make compliance easier for businesses.

Clearer and Easier VAT Filing for Businesses

A major change in the new rules removes the requirement for companies to issue self-invoices when applying the reverse charge mechanism.
Instead, businesses only need to maintain standard supporting documents such as:

• invoices

• contracts

• transaction records

This update reduces paperwork while still giving the Federal Tax Authority (FTA) all the necessary evidence to verify compliance.

The Ministry explained that the new rule reduces procedural burdens, improves administrative clarity, and ensures that audits are supported by reliable documentation.

Five-Year Deadline for VAT Refund Claims

Another important change introduces a five-year limit for claiming any refundable VAT after accounts have been reconciled.
Once the five-year period ends, businesses can no longer submit refund claims.

This rule provides companies with:

• greater financial certainty

• protection from old or outdated claims

• more efficient tax planning

Stricter Rules to Prevent VAT Evasion

To safeguard the UAE’s tax system, the FTA will now have the power to deny input-tax deductions if a transaction is linked to any tax-evasion activity.

Businesses must verify that all supplies they receive are:

• legitimate

• compliant with tax rules

• accurately documented

This measure strengthens governance across the supply chain, encourages responsible practices, and protects public revenue from misuse.

Supporting UAE’s Business Environment and National Economy

The Ministry of Finance stated that these updates will improve fairness, strengthen transparency, and support better management of national revenue.
The revised rules also enhance the UAE’s competitive business environment and reinforce the long-term economic sustainability of the country.

With these changes, businesses can expect a more streamlined VAT process, clearer compliance rules, and a system that supports growth while maintaining international tax standards.