Amendments to the UAE VAT Law, made by Federal Decree-Law No. 16 of 2025, took effect on 1 January 2026. Alongside them, the Tax Procedures Law was also amended. Some of the changes simplify compliance; others introduce new risks and a time limit that some businesses may not yet have noticed.
These are the three changes most businesses should act on.
1. No more self-invoicing under the reverse charge
When a UAE business buys services or certain goods from overseas, it accounts for VAT itself under the reverse charge mechanism. Previously, businesses were expected to issue a tax invoice to themselves for these transactions.
That requirement has been removed. You no longer need to self-invoice when applying the reverse charge. However, you must still keep the supporting documents for the transaction, such as the supplier’s invoice and contract, as set out in the Executive Regulation. If supplier paperwork is incomplete, it is worth tightening the process for obtaining it, because your input tax position depends on it.
2. A five-year limit on excess input tax
This is the change with the most immediate consequences.
Where a business has more recoverable input tax than output tax, the excess can be carried forward or claimed as a refund. The amendments now limit this to five years from the end of the tax period in which the excess arose. After that, it can no longer be refunded or offset.
There is a transitional rule. If the five-year period had already expired, or would expire within one year of 1 January 2026, the business has until 31 December 2026 to submit a refund request for those amounts.
What to do now: review your VAT account for any older excess input tax balances, particularly from 2018 to 2021. If you have balances that fall within the transitional rule, prepare and submit the refund claim before the end of 2026, allowing time for the supporting documents the FTA is likely to request.
3. Input tax can be denied in evasion chains
The amendments allow the FTA to deny input tax recovery where a supply forms part of a tax evasion arrangement and the business knew, or should have known, that this was the case.
The practical effect is that supplier due diligence now matters for VAT, not only for commercial reasons. Businesses in sectors where fraudulent supply chains are more common, such as trading in electronics, metals or other high-value goods, should be able to show that they checked who they were dealing with.
Sensible steps include:
- verifying suppliers’ Tax Registration Numbers and trade licences before trading;
- being alert to prices that look too good to be true, unusual payment requests or suppliers with no visible business presence; and
- keeping a record of the checks you carried out.
Other points to note
The changes to the Tax Procedures Law that took effect at the same time also deserve attention, particularly around time limits and procedures for dealing with the FTA. If you have an open refund claim, audit or reconsideration request, check how the amended rules apply to it.
Next steps
For most businesses, the priorities are clear: confirm your reverse charge documentation is in order, review older excess input tax balances before 31 December 2026, and put basic supplier checks in place.
If you would like us to review your VAT position against the new rules, please get in touch.
This article is general information based on the rules as we understand them at the date of publication. It is not advice on your circumstances. Laws and practice change, so please speak to us before acting on it.
