Starting January 1, 2026, there will be some important changes to the UAE’s VAT regulations that businesses and taxpayers need to know about. The Ministry of Finance has introduced these changes through Federal Decree-Law No. (16) of 2025, aiming to make the tax process simpler and more efficient.
1. No More Self-Invoices for Reverse Charge Mechanism
One of the key updates is that businesses will no longer need to issue self-invoices when using the reverse charge mechanism. Instead, they’ll only need to keep supporting documents related to transactions. This will simplify the process, cut down on paperwork, and make it easier to stay compliant with the rules.
2. Five-Year Deadline for Excess Refundable Tax
Another important change is a deadline for claiming any excess refundable tax after reconciliation. This means taxpayers will need to request their refund within five years or lose the right to it.
The new amendments also give the Federal Tax Authority (FTA) more power to prevent tax evasion. If they discover that a supply is part of a tax-evasion scheme, they can block businesses from claiming input tax deductions. Taxpayers will need to make sure that their transactions are legitimate before applying for these deductions, which helps ensure fairness across the board.
These updates are part of the UAE’s continuous efforts to improve its tax system, making it more transparent, efficient, and in line with international standards. If you’re interested in the future of finance in the UAE, read about the first transaction made with digital dirham. It’s an important step for the new era of the country’s payment system. Stay tuned for more updates!
