The UAE Ministry of Finance has announced major changes to the Value Added Tax (VAT) filing system, effective January 1, 2026. These updates aim to simplify compliance, reduce administrative workload, and align the country’s tax framework with global best practices.
The revised rules are part of the newly issued Federal Decree-Law No. 28 of 2024, which introduces improvements in documentation, refund timeframes, and tax governance — creating a smoother experience for businesses across the UAE.
1. No More Self-Invoices Under Reverse Charge
Businesses that apply the reverse charge mechanism—commonly used for imported goods and services—will no longer be required to generate self-invoices.
Instead, maintaining standard supporting documents such as supplier invoices and contracts will be sufficient.
Impact:
- Significantly reduced paperwork
- Faster and cleaner bookkeeping
- Lower administrative burden, especially for SMEs
2. New 5-Year Window to Claim VAT Refunds
Under the new law, taxpayers will have five years to claim refundable VAT after reconciling their accounts.
After this period, no additional claims can be made — creating a structured timeframe and preventing old, unresolved refund cases.
Impact:
- Clearer financial planning
- Better refund management
- Reduced backlog of pending VAT claims
3. Stronger Compliance & Anti-Evasion Measures
The Federal Tax Authority (FTA) will now have the authority to deny input-tax deductions if a transaction is found to be part of a tax-evasion arrangement.
This means businesses must ensure that all suppliers and subcontractors maintain compliant tax practices.
Impact:
- Encourages clean, transparent supply chains
- Prevents fraudulent VAT claims
- Strengthens trust in the tax ecosystem
4. Binding Directions for Clarity
One of the biggest improvements is the FTA’s ability to issue binding directions—official guidance on how tax laws should be interpreted.
This guarantees consistent and uniform application of VAT rules across the country.
Impact:
- Greater legal certainty
- Reduced risk of errors
- More confidence for new and existing businesses
5. Transitional Relief for Older VAT Credits
Businesses whose 5-year claim window has expired — or is expiring within one year from January 1, 2026 — will receive a one-year extension to file their refund claims.
If a refund decision is still pending, they will have two years to submit a voluntary disclosure.
Impact:
- Opportunity to recover previously expired credits
- Relief for companies with unresolved historic VAT issues
What These Changes Mean for Businesses
The UAE is clearly moving toward a more streamlined and business-friendly tax environment. These reforms will:
- Reduce paperwork and administrative burden
- Improve compliance and audit readiness
- Provide clearer, more predictable tax processes
- Support SMEs and multinational companies alike
- Strengthen the UAE’s reputation as an attractive global business hub
Overall, the 2026 VAT updates are designed to create a fair, transparent, and modern tax system that supports long-term economic growth.
