New Update to Strengthen UAE’s Tax System
Dubai: The UAE Ministry of Finance has released a new federal decree introducing key updates to the country’s Value Added Tax (VAT) law, which will take effect on January 1, 2026.
The purpose of these changes is to make the tax system simpler, clearer, and aligned with global standards.
According to the Ministry, these amendments support the UAE’s long-term plan to improve tax administration, reduce complexity, and ensure strong compliance across all sectors.
Simpler and More Transparent VAT Filing
One of the biggest updates is the removal of the requirement for businesses to issue self-invoices when applying the reverse charge mechanism.
Instead, companies must maintain the usual supporting documents such as invoices, contracts, and transaction records.
This change aims to:
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Reduce paperwork
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Improve administrative efficiency
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Provide the Federal Tax Authority (FTA) with clear audit evidence
The Ministry explained that this step will help businesses handle VAT more easily while maintaining strong transparency.
Five-Year Deadline for VAT Refund Claims
Another major amendment introduces a five-year limit on claiming refundable VAT after financial accounts have been finalized.
Once the five-year period is over, businesses can no longer submit a refund claim.
This rule improves clarity and prevents very old claims from accumulating, giving companies a more predictable understanding of their tax position.
Stronger Measures Against Tax Evasion
To protect the system and prevent misuse, the Federal Tax Authority will now have the right to deny input-tax deductions if a transaction is linked to any tax-evasion activity.
This means businesses must:
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Verify that every supply they receive is legitimate
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Check all documentation before claiming input VAT
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Follow the audit and compliance procedures set by the FTA
This measure strengthens the integrity of the UAE tax framework and protects public revenue.
Enhancing Fairness and Economic Stability
The Ministry of Finance stated that these updates will:
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Improve fairness among taxpayers
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Strengthen transparency
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Support effective management of public funds
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Maintain the UAE’s competitive business environment
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Contribute to long-term economic sustainability
By modernizing VAT rules, the UAE aims to offer a tax system that is both business-friendly and internationally compliant.
