UAE Announces Key Updates to VAT & Tax Procedures Law

The Ministry of Finance (MoF) has issued Federal Decree-Law No. 16 of 2025, which will introduce changes to the existing UAE VAT Law and Tax Procedure Law. Though the proposed changes will come into effect from 1st January 2026, they will help simplify and strengthen the country’s existing VAT framework.

These revisions aim to enhance transparency and compliance. They will support a business-friendly environment and align tax processes with global best practices.

Key Amendments to the UAE VAT Law

1. Article 48, Clause 1 (Reverse Charge)

The need for businesses to produce self-invoicing documents for importing goods and services for business use has been removed. This amendment simplifies the tax compliance and administrative processes. The document will now be required only when the required supplier information is unavailable. In these cases, self-invoicing is necessary to facilitate support for VAT recovery.

2. Article 74, Clause 3 (Excess Recoverable Tax)

Taxpayers can now carry forward excess recoverable VAT for up to five years from the date incurred. After this period, recovery rights expire.​ This amendment will assist in the timely VAT reconciliations and encourage a more proactive approach to VAT management.

3. Additions to Article 54 (Recoverable Input Tax)

Businesses must adopt due diligence processes. Input tax deduction is denied if a supply is linked to a chain designed for tax evasion. The input tax will not be allowed if the taxpayer deliberately fails to report such supplies or is unable to verify the legitimacy of the supply.

This amendment is in line with the government’s stance to ensure the integrity of the tax regime while placing the accountability and responsibility on businesses to do the necessary due diligence that is required.​

4. Article 79 (bis) – Statute of Limitation

The statute of limitations article, Article 79 (bis) of the Federal Decree- Law No. (8) of 2017, is repealed, and any conflicting provisions will no longer be valid. This change will help further reduce the ambiguity regarding the audit time limits.

Key Updates to the Tax Procedures Law

1. Article 10, Clause 5 (Voluntary Disclosure)

To further help streamline the tax process, the once-mandatory voluntary disclosure is not required for all errors. This disclosure will now only be required for cases that the FTA identifies. Other errors for non-specified cases can be corrected directly through tax returns. This amendment will help the process to be robust and reduce the burden on the administration.​

2. Article 3, Clause 1 – Transitional Relief

Given that the new updates to the law will come into effect on 1st January 2026, the businesses whose five-year period has expired and those who still have a year left are given an opportunity to claim outstanding funds. The new deadline for the settlement of these claims is 31st December 2026. Any failure to act within this window will lead to the forfeiture of the refund.

The new updates to the VAT and Tax Procedure Law will help steer businesses to not only reassess their positions but also help them secure any pending VAT amount or credit before the aforementioned deadline.

Why do these changes matter?

The revised VAT framework will further promote the spirit of transparency and ensure better compliance. This further aids businesses to operate in a tax system that is fair and allows the necessary room to rectify any mistakes.

A robust and agile tax regime is what truly supports the long-term vision for any economy. Not only does it pave the way for a just and reliable tax collection system, but it also helps the government support key public initiatives. This push is in line with the government’s vision to reduce any administrative friction that may hamper business operations and further move the country towards its goal of becoming a well-regulated economic epicenter in the region.

Today, VAT compliance is not just a legal requirement but a driver to help the government sustain a stable economy.

Excellence: Your Partner in VAT Compliance

With the evolving VAT landscape already complex, businesses today struggle to keep up with the constant regulatory updates. Any new update adds another layer of complexity, often leaving businesses with the challenge of keeping up. It is within those challenges that costly mistakes occur.

This is where Excellence steps in. Rooted in the philosophy to empower businesses to meet their legal obligations and minimize any risk of non-compliance. Our team of VAT specialists helps businesses by not just ensuring that they stay on the right side of compliance but also provides practical and actionable solutions designed for their operational needs.

Our service is not just limited to VAT advisory and compliance, it spans the entire VAT lifecycle, right from VAT registration to return filing and from VAT refund claims to VAT deregistration. So if your business is looking for a partner to help you stay compliant, then our team is designed to guide you through it.

Because at the end of the day, VAT should never feel like an unsolvable puzzle, and with us, it doesn’t have to.