Key Highlights

• Businesses no longer need to issue self-invoices for reverse charge transactions starting January 1, 2026, reducing administrative paperwork while maintaining documentation requirements.
• Taxpayers have only five years to claim excess VAT refunds after reconciliation, with a special December 31, 2026, deadline for historical claims from 2018-2020 tax periods.
• The Federal Tax Authority gains power to deny input tax deductions on supplies linked to tax evasion arrangements, requiring businesses to implement robust supplier verification processes.
• Federal Decree-Law No. 16 of 2025 amends the original 2017 VAT legislation to align the UAE’s tax system with international standards and enhance regulatory efficiency.

The United Arab Emirates will implement significant changes to its Value Added Tax legislation starting January 1, 2026, following the issuance of Federal Decree-Law No. (16) of 2025 that amends Federal Decree-Law No. (8) of 2017. 

These amendments represent the UAE government’s continued commitment to modernizing its tax framework while reducing administrative burdens for businesses and enhancing compliance with international standards.​

Elimination of Self-Invoicing Requirements

Under the new amendments, businesses will no longer be required to issue self-invoices when applying the reverse charge mechanism. 

Instead, taxable persons must maintain supporting documentation, including supplier-issued invoices, contracts, import declarations, and other evidence proving the nature of supply transactions. 

This change removes duplicate paperwork and aligns the UAE with best practices observed in jurisdictions such as Singapore, the United Kingdom, and Australia, where reverse-charge record-keeping has been streamlined while remaining audit-ready.​

Five-Year Limitation on VAT Refund Claims

The legislation introduces a statutory five-year deadline for taxpayers to submit requests for reclaiming excess refundable tax after account reconciliation has occurred. Once this period expires, the right to claim refunds will permanently lapse. 

Businesses that have historical VAT refund positions or credit balances from tax periods 2018-2020 have until December 31, 2026, to submit their claims under transitional relief provisions before these amounts become unrecoverable. This measure prevents the accumulation of outdated balances and strengthens financial certainty across the tax system.​

Enhanced Anti-Tax Evasion Measures

The Federal Tax Authority now has expanded powers to deny input tax deductions if it determines that a supply forms part of a tax evasion arrangement. 

Input tax deductions will be disallowed when supplies are part of chains linked to tax evasion and the taxpayer knew or should have known about this connection based on circumstances when claiming the input tax. 

Businesses must implement documented supplier due diligence and invoice verification processes to demonstrate compliance and protect their input tax recovery rights. This shared responsibility approach strengthens governance throughout the supply chain and safeguards public revenue.​

Business Compliance Implications

Organizations operating in the UAE should immediately review their VAT positions and implement necessary compliance measures before the January 2026 effective date. 

Priority actions include reconciling all VAT accounts to identify historical refund opportunities and establishing robust supplier verification systems to prevent input tax disallowances, and ensure proper documentation retention for reverse charge transactions. 

Companies in sectors frequently encountering reverse-charge VAT—including trading, real estate, transportation, logistics, and professional services—will particularly benefit from the simplified administrative procedures.