The United Arab Emirates is set to enter a new phase of tax maturity. Effective January 1, 2026, the UAE Ministry of Finance will implement significant amendments to the Tax Procedures Law (Federal Decree-Law No. 17 of 2025) and the VAT Law (Federal Decree Law No. 16 of 2025).

While the standard VAT rate remains at 5%, these procedural shifts introduce strict deadlines for refunds and new compliance requirements that businesses must prepare for immediately. Here are the key changes and how they impact you.

the UAE Ministry of Finance has introduced significant amendments to the Tax Procedures Law (Federal Decree-Law No. 17 of 2025) and the VAT Law (Federal Decree Law No. 16 of 2025), effective January 1, 2026.

The changes primarily affect VAT-registered businesses and professionals. Here are the four key amendments and two additional VAT changes outlined in the article:

1. Five-Year Deadline for Tax Refunds

For the first time, a statutory five-year deadline has been introduced for claiming VAT refunds or using credit balances.

  • The Change: Refund claims must be submitted within five years from the end of the relevant tax period. Previously, these could be carried forward indefinitely.
  • Transitional Relief: Taxpayers have a one-year window (from January 1, 2026) to claim refunds for credit balances that arose more than five years ago.

2. Flexibility in Correcting Administrative Errors

The law now makes a distinction between errors that affect the “tax due” and those that do not.

  • The Change: Voluntary Disclosures (VDs) will no longer be mandatory for every minor error. If an error does not change the amount of tax due, it can often be corrected directly in a subsequent tax return, reducing the compliance burden.

3. Extended Audit Powers for Refunds

The Federal Tax Authority (FTA) has been granted more time to conduct audits in specific scenarios related to refunds.

  • The Change: If a refund application is submitted in its fifth year (the final year of the window), the FTA has an additional two years to complete an audit or issue an assessment.

4. Restrictions on Input Tax (Tax Evasion Links)

A new provision (Article 54b) allows the FTA to deny input tax recovery if a supply chain is linked to tax evasion.

  • The Change: The FTA must reject recovery if the taxpayer knew of tax evasion, and it may reject it if the taxpayer should have known. This places a higher responsibility on businesses to perform due diligence on their vendors.

Additional VAT Simplifications:

  • Reverse Charge Mechanism: From January 1, 2026, businesses will no longer be required to self-issue tax invoices for imports of goods and services subject to the reverse charge.
  • Impact on Individuals: The report clarifies that these changes do not affect the 5% VAT rate on daily consumption. The amendments are procedural and impact VAT-registered entities rather than individual consumers.

Key Takeaway: Businesses with old credit balances should act during the 2026 transitional window to avoid losing the right to those refunds.

The Bottom Line

The 2026 amendments signal that the UAE’s tax system is moving toward a more structured, time-bound framework. For businesses, the message is clear: Review your historical VAT positions now. With the introduction of the five-year expiry rule, any unclaimed credits sitting on your books could disappear if not addressed during the 2026 transitional year.

Disclaimer: Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.