UAE rolls out updated VAT rules starting January 2026
- 04 Dec, 2025
UAE rolls out updated VAT rules starting January 2026
The Ministry of Finance has issued a new amendment to the VAT law, Federal Decree-Law No. 16 of 2025, which will take effect on January 1, 2026. The goal is straightforward: streamline how VAT is handled and make the system more efficient for both businesses and regulators.
One of the biggest changes removes the need for taxable persons to issue self-invoices when using the reverse charge mechanism. Instead, they’ll only need to keep the supporting documents outlined in the Executive Regulation. This cuts down on routine paperwork while still giving auditors clear evidence when needed.
Another key update introduces a five-year cutoff for reclaiming excess refundable tax after reconciliation. Once that window closes, the right to request a refund ends. The idea is to stop old balances from lingering and give businesses more certainty about their tax positions.
To curb tax evasion, the Federal Tax Authority now has the authority to block input tax deductions if a supply is linked to an evasion scheme. Businesses are expected to verify that their suppliers and transactions meet the required standards before claiming any deduction. It’s a shared-responsibility approach meant to strengthen compliance across the supply chain.
According to the Ministry, these changes are part of the UAE’s broader push to keep the tax framework fair, transparent, and aligned with international practices. The updated rules are also expected to support long-term financial sustainability and reinforce the country’s overall economic competitiveness.
