UAE to introduce VAT rule changes from January 2026

Dubai: The UAE’s Ministry of Finance has issued a new federal decree, which updates parts of the UAE’s VAT law. The new rules will take effect on January 1, 2026. The aim is to make the tax system easier to use and made in line with international standards.

"The move comes as part of the UAE’s ongoing efforts to develop its tax system and enhance administrative and regulatory efficiency. The amendments aim to simplify tax procedures for taxpayers while ensuring transparency and compliance with international standards," the Ministry said in a statement.

One of the key changes removes the need for businesses to issue self-invoices when using the reverse charge mechanism. Instead, businesses must keep the normal supporting documents for their transactions, such as invoices, contracts or other records. This reduces paperwork and still gives the Federal Tax Authority the evidence it needs when checking compliance.

"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. This not only enhances administrative efficiency but also provides clear audit evidence and reduces procedural burdens," the MoF added.

Among the changes is a five-year deadline for claiming back any refundable VAT after accounts have been reconciled. After five years, the right to make a refund claim ends. This helps prevent old claims from piling up and gives businesses more certainty about their tax position.

To protect the system from abuse, the Federal Tax Authority will be allowed to deny input-tax deductions if it finds that a transaction is connected to a tax-evasion arrangement. Businesses must therefore make sure that the supplies they receive are legitimate before claiming any input VAT.

"Taxpayers are required to verify the legitimacy and integrity of supplies before deducting input tax, in line with the procedures and measures set out by the FTA. This approach reinforces shared responsibility, strengthens governance across the supply chain, and safeguards public revenue," the Ministry added.

The Ministry of Finance said these changes strengthen transparency, improve fairness among taxpayers and support efficient management of public revenue. The updates also help maintain the UAE’s competitive business environment and support the long-term sustainability of the national economy.