UAE to introduce new VAT rules from January

UAE has long been recognised as a global business hub, known for its transparent regulations, and forward-looking economic policies. As part of its efforts to strengthen the financial system, the Ministry of Finance has announced updates to the country’s VAT law, which will take effect on January 1, 2026. 

These changes are aimed at making the tax system easier to use and bringing it in line with international standards. The Ministry stated that the amendments are part of the UAE’s ongoing efforts to develop its tax framework, simplify procedures for taxpayers, improve administrative efficiency, and ensure transparency and compliance with global best practices.

One of the key changes is the removal of the requirement for businesses to issue self-invoices when using the reverse charge mechanism. Instead, companies will only need to retain normal supporting documents, such as invoices, contracts, or other records related to their transactions. 

This adjustment reduces paperwork while still giving the Federal Tax Authority sufficient evidence for compliance checks. The Ministry explained that this measure enhances administrative efficiency, provides clear audit evidence, and reduces procedural burdens on businesses.

The new rules also introduce a five-year deadline for claiming any refundable VAT after accounts have been reconciled. Once this period ends, the right to make a refund claim will no longer be available. This change helps prevent old claims from piling up and provides businesses with greater certainty about their tax positions.

To protect the system from abuse, the FTA will now have the authority to deny input-tax deductions if a transaction is linked to a tax-evasion arrangement. Businesses must ensure that all supplies they receive are legitimate before claiming input VAT. 

The Ministry highlighted that taxpayers are required to verify the legitimacy and integrity of supplies, reinforcing shared responsibility, strengthening governance across the supply chain, and safeguarding public revenue.

The road ahead

The introduction of updated VAT rules reflects the UAE’s ongoing commitment to transparency, strong governance, and a stable investment environment. As the country continues to evolve, these improvements will help maintain confidence among local businesses and international investors alike.

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