New VAT Rules in UAE 2026: Amendments, Reverse Charge & Deadlines

The UAE’s VAT law will change from January 1, 2026, to simplify compliance and strengthen enforcement by removing reverse-charge self-invoicing, setting strict VAT refund deadlines, and empowering authorities to deny input tax linked to evasion.

Key Takeaways

• Businesses will no longer be required to issue self-invoices for reverse charge transactions and must instead retain supplier invoices and import documentation as evidence.
• A strict five-year time limit will apply for claiming any excess refundable VAT from the end of the relevant tax period.
• Transitional relief allows businesses to submit refund claims for older VAT credits by December 31, 2026, before those credits expire.
• The Federal Tax Authority may deny input VAT recovery where transactions are linked to tax evasion, and the taxpayer knew or should have known.
• The standard VAT rate will remain at five percent, with no changes to exemptions, zero-rating, or VAT group rules.

What is the 2026 UAE VAT Amendment?

The 2026 UAE VAT Amendment, introduced by Federal Decree-Law No. 16 of 2025, updates key parts of the UAE VAT Law (originally issued in 2017). Effective from January 1, 2026, the amendment aims to simplify VAT compliance, reduce paperwork (e.g. by removing self-invoicing under reverse charge), and set clearer rules for refunds and audits. 

Developed by the Ministry of Finance and the FTA, the changes also align UAE VAT rules with global standards and form part of a broader tax modernization effort. Businesses should review the new rules to avoid penalties and benefit from transitional relief.

Major Changes and Key Amendments in 2026

The 2026 VAT Law amendments introduce key changes aimed at simplifying processes, enforcing timely compliance, and strengthening the VAT system against fraud. Each change is detailed below with its background, rationale, and affected parties.

1. Elimination of Self-Invoicing for Reverse Charge Transactions

The requirement for businesses to issue self-invoices under the Reverse Charge Mechanism (RCM) has been removed. Businesses must now retain supplier-issued invoices and relevant import documentation to account for VAT on reverse-charged transactions.

Before 31st December 2026: Businesses importing goods or services, or purchasing from domestic suppliers under reverse charge, were required to create internal self-invoices documenting VAT due. This duplicated information already available in customs declarations or supplier invoices.

Purpose of the change: To reduce administrative burdens and simplify compliance. The change eliminates redundant documentation while preserving audit transparency, aligning the UAE with global VAT standards.

Who is affected:

• Importers of goods or services
• Recipients of reverse-charged local supplies (e.g., gold, scrap metal)
• All VAT-registered entities using reverse charge

2. Introduction of a 5-Year Limit on VAT Refund Claims

Businesses can now claim excess input VAT refunds only within five years from the end of the relevant tax period. Unclaimed balances beyond that period will expire and become non-refundable.

Before 31st December 2026: There was no fixed deadline to claim VAT credits. Businesses could carry forward balances indefinitely, leading to uncertainty and buildup of dormant credits.

Purpose of the change: To encourage timely reconciliation of VAT accounts and limit exposure to outdated refund claims. It improves financial discipline for both taxpayers and the tax authority.

Who is affected:

• Exporters and zero-rated suppliers
• Capital-intensive businesses accumulating input VAT
• Companies with old unclaimed credits, especially from 2018–2020

3. FTA Empowered to Deny Input Tax in Cases of Evasion

The FTA now has the authority to deny input VAT recovery if the supply was part of a tax evasion arrangement and the buyer knew or reasonably should have known about it. Buyers must verify the legitimacy of their suppliers and transactions.

Before 31st December 2026: Input VAT was generally recoverable based on a valid tax invoice, even if the supplier committed VAT violations. The buyer's liability was limited unless the invoice was clearly invalid.

Purpose of the change: To strengthen anti-fraud enforcement and ensure VAT integrity. The change discourages negligence in supplier dealings and promotes a culture of shared compliance responsibility.

Who is affected:

• Businesses in high-risk sectors like electronics, gold, or scrap trading
• Importers and companies with complex supplier chains
• VAT-registered entities relying on third-party suppliers or agents

4. Other Notable Amendments and Clarifications

In addition to the major VAT changes, several technical updates have been made:

Audit Time Limits Now Governed by Tax Procedures Law:

• The VAT Law article that previously set audit time limits (typically 5 years) has been removed.
• From 2026, all time limits for VAT audits and assessments will be governed solely by the Tax Procedures Law.
• The standard audit window remains 5 years but can be extended in specific cases (e.g. if a refund is filed in the 5th year).
• Businesses should continue to keep VAT records for at least 5 years and refer to the updated Tax Procedures Law for audit-related queries.

VAT Law Now Aligned with E-Invoicing System:

• The 2026 amendments include updates to definitions and legal terms to support the rollout of mandatory e-invoicing.
• This ensures consistency between the VAT Law and upcoming e-invoicing regulations (which include penalties and deadlines).
• Businesses must prepare for e-invoicing implementation in phases from 2026 onward (detailed in Topic 2).

No Change to VAT Grouping Rules:

• VAT groups remain unaffected by the new amendments.
• Current rules like joint liability, single group VAT return, and internal supply exemptions still apply.
• However, VAT groups must still follow the new refund timelines and input tax rules collectively, since the group is treated as one taxpayer.
• It’s important for group members to coordinate on compliance and documentation.

Transition Guidelines to Comply with the New VAT Rules (UAE 2026)

With the 2026 VAT amendments approaching, businesses must act proactively to ensure full compliance. The following key actions are recommended:

Update Internal Processes for Reverse Charge Mechanism (RCM)

Businesses must stop issuing self-invoices for reverse charge transactions from 1st January 2026. Instead, they should retain supplier invoices and import documentation as proof. Accounting systems should be updated to remove automated self-invoice generation, and finance teams should be retrained to align with the new documentation requirements while continuing to correctly report reverse charge VAT in returns.

Identify and Claim Old VAT Credit

Conduct a thorough review of past VAT returns to identify any unclaimed refunds or carried-forward credits. Under the new rules, credits from 2018 to 2020 must be claimed by December 31, 2026, or they will expire. Businesses should prioritize filing outstanding refund claims and implement systems to track VAT credits going forward to ensure none exceed the new five-year claim window.

Strengthen Supplier Due Diligence

In light of stricter rules around input tax rejections, businesses must verify supplier compliance. This includes checking the validity of the supplier’s VAT registration, ensuring the correct VAT treatment is applied, and confirming that invoices meet legal standards. Suspicious transactions (e.g., cash-only offers, unregistered suppliers charging VAT) should trigger deeper investigation. Documenting these checks is crucial for audit defense. Staff should also be trained to recognize red flags of potential VAT fraud.

Leverage Official Guidance

Monitor updates and clarifications from the Federal Tax Authority (FTA), including procedural changes, filing instructions, and compliance expectations. Guidance may include templates for documentation, updated VAT return formats, and due diligence standards. Staying informed through official channels or accredited tax professionals will help businesses stay aligned with regulatory changes.

Assess Systems and Records

Ensure all VAT records dating back to 2018 are organized and accessible, particularly as the FTA may increase audit activity in 2026. Businesses should also begin preparing for related regulatory changes, including mandatory e-invoicing. Assess whether current invoicing and accounting software can support electronic invoicing formats and integrate with the upcoming digital systems.

Conclusion

The 2026 UAE VAT amendments modernize the tax framework by enhancing transparency, efficiency, and enforcement. Key changes remove unnecessary steps, such as self-invoicing under reverse charge, and introduce practical limits, like a five-year deadline for VAT refund claims. These reforms also emphasize accountability, holding businesses responsible for avoiding indirect involvement in tax evasion.

For compliant businesses, the changes are manageable with proper preparation. The aim is to simplify compliance through clearer documentation and timelines. By updating internal processes and monitoring VAT credits, businesses can remain compliant and reclaim eligible refunds before deadlines. While the FTA may offer guidance, each business is ultimately responsible for its own compliance.