The UAE is preparing to implement a new set of rules governing value-added tax, with officials confirming that Federal Decree-Law No. (16) of 2025 will take effect at the start of 2026. The legislation modifies key provisions of the country’s VAT framework first introduced in 2017.
While the government has been rolling out several reforms aimed at streamlining its tax administration, the latest update focuses on easing procedural steps for businesses and strengthening oversight across supply chains. Officials said the changes are part of broader efforts to refine the tax structure and align it more closely with international norms.
Among the adjustments is the removal of the obligation for taxable persons to issue self-invoices when applying the reverse charge mechanism. Instead, they must keep supporting documents that demonstrate the validity of the relevant supply transactions, as detailed in the Executive Regulation. Authorities expect this shift to improve record-keeping standards, reduce administrative work, and provide clearer evidence during audits.
The new decree-law also introduces a five-year window for submitting claims to recover excess refundable tax once reconciliation has been completed. After this period, taxpayers lose the right to seek reimbursement. Officials described the time limit as a safeguard that prevents old balances from accumulating and helps maintain transparency in refund processes.
In a measure targeting tax evasion, the Federal Tax Authority (FTA) is now empowered to reject input tax deductions if it finds that the supply is linked to an evasion scheme. Businesses must ensure the legitimacy of transactions before making deductions, following the procedures set out by the FTA. The requirement is designed to reinforce accountability and protect public funds by encouraging stronger governance throughout the supply chain.
The Ministry of Finance said the amendments are intended to strengthen the UAE’s tax environment by improving administrative efficiency, supporting fair compliance, and contributing to the long-term sustainability of public revenues.
