UAE Tax Update: Country to Implement Key Tax Law Changes from 2026 - A Must Know for UAE Tax Consultants
From January 2026 onwards, UAE will implement strict tax revisions that will tighten controls on evasion while also easing legitimate taxpayers of a number of compliance responsibilities.
The Ministry of Finance, United Arab Emirates ( UAE ), has issued two important legislative changes, Federal Decree ‑ Law 16 of 2025 and Federal Decree‑Law 17 of 2025, amending the existing VAT ( Value Added Tax ) and the tax procedures.
The changes, which will take effect on January 1, 2026, restructure the UAE's tax landscape following the implementation of VAT in 2018. The new regulations will call for a thorough examination and modification of current accounting, invoicing, refund-claim, and audit-response procedures for tax consultants, business owners, and compliance teams.
A thorough explanation of the primary changes and their practical implications can be found below.
Self-Invoicing Obligations under RCM
Under the amended VAT law, it is clarified that taxpayers are no longer required to issue self-invoices to themselves when they import certain goods or services for business use under the Reverse Charge Mechanism (RCM).
The Ministry said that “The amendments stipulate that taxable persons are relieved from issuing self-invoices when applying the reverse charge mechanism, while requiring them to retain supporting documents related to supply transactions, as specified by the Executive Regulation.”
Five-Year Limitation on Excess Recoverable Input Tax
A new provision (Article 74(3) of the amended law) introduces a statute of limitations, excess input VAT that is recoverable (i.e., unused input tax credits) must now be utilised or refunded within 5 years from the end of the tax period in which it arose.
After the 5-year window, any unclaimed credit will expire and cannot be carried forward or refunded.
The ministry said that “The amendments also establish a five-year time limit for submitting requests to reclaim any excess refundable tax after reconciliation has taken place.”
It was also added by the UAE Finance Ministry that “Once this period has elapsed, the right to reclaim the tax expires, preventing the build-up of old balances, strengthening financial certainty, and promoting fairness among taxpayers, in line with international best practices for regulating refund processes and reviewing balances.”
The ministry, through these amendments, brought a statutory time limit for using or recovering excess recoverable input tax which was not didn't previously exist under the VAT Act, capping the carry-forward period at five years from the end of the tax period in which the excess occurred.
Revision of Voluntary Disclosure Rules
Federal Decree-Law No. 16 of 2025 removes Article 79 (bis), which previously states about the statute of limitation for tax audits, voluntary disclosures, and related actions. It shifts all such timelines to a single source, the revised Article 46 of the Tax Procedures Law. Article 46 will now act as the main rulebook for limitation periods across all UAE taxes, including VAT, Corporate Tax, Excise Tax, and any future federal taxes.
Simplified Error-Correction: Voluntary Disclosure Now Required Only in Specific Cases
The amendment introduces two methods for correcting errors, one is Voluntary Disclosure, which will apply only in cases specifically identified by the tax authority, and the second one is filing a corrected tax return, which covers all other situations.
Refund of Credit Balances
The revised Tax Procedures Law now provides guidance on taxpayers’ rights to claim refunds of credit balances held with the Federal Tax Authority. It says that a taxpayer may submit a refund request for any credit balance to which they are legally entitled under the Tax Law, as long as the available balance exceeds any outstanding tax liabilities or administrative penalties, which is authorised under Article 38. This amendment removes confusions around the refund process.
Additionally, the newly added clauses introduce detailed rules for submitting and reviewing tax refund requests, especially in cases where credit balances arise after the standard five-year period or close to its expiry.
As per the new procedures, as per Article 38(3), if a credit balance is created as a result of a decision issued by the tax authority after the five-year period has lapsed or within the final 90 days of that period, the taxpayer is granted a one-year window from the date the credit arose to submit a refund request.
UAE Finance Ministry’s statement on ‘Strengthening Governance’
The ministry, for governing and controlling the tax evasions, has taken steps to combat evasions. According to the sources, ‘the amendments authorises the Federal Tax Authority (FTA) to deny the deduction of input tax if it determines that the supply forms part of a tax-evasion arrangement.’
As a result, the Ministry has advised taxpayers to confirm the authenticity of their supply and the input tax they plan to claim. Therefore it is important that the consultancies or any tax assisting person or firm should be aware of the FTA mandates and measures. From January 2026 onwards, UAE will implement strict tax revisions that will tighten controls on evasion while also easing legitimate taxpayers of a number of compliance responsibilities.
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