Key Highlights 

• Businesses have only 5 years from the end of a tax period to claim VAT refunds, with a special one-year grace period ending December 31, 2026 for expired credits.​
• The Federal Tax Authority can now deny input tax deductions if suppliers are involved in tax evasion, making supplier verification a compliance necessity.​
• Self-invoicing is no longer required for reverse charge transactions, but comprehensive supporting documentation must be retained per Executive Regulation standards.​
• The FTA gained authority to issue binding tax directions that apply to both taxpayers and the authority itself, ensuring consistent interpretation across all cases.

If your company has unclaimed VAT credits sitting in your books, you need to pay attention. Starting January 1, 2026, significant changes to UAE tax procedures are taking effect that could impact your ability to claim those refunds.​

The UAE Ministry of Finance has issued two Federal Decree-Laws—No. (17) of 2025 amending the Tax Procedures Law and No. (16) of 2025 amending the Value Added Tax Law. While these amendments might sound like routine legal updates, they introduce hard deadlines and stricter compliance requirements that every business operating in the UAE should understand.​

The Clock is Now Ticking on VAT Refunds

Here’s the headline change: businesses now have exactly five years from the end of a tax period to submit requests for reclaiming credit balances and excess refundable VAT. After that five-year window closes, those refunds are gone. No extensions, no exceptions under the standard rules.​

For many businesses, this won’t be an immediate concern if they regularly file and claim their VAT credits. But if you’re one of those companies that has delayed filing refund claims—perhaps because the amounts seemed small or because administrative capacity was focused elsewhere—this new limitation period demands attention.​

There’s a Grace Period, But It Won’t Last Long

The government recognizes that some businesses might have older credit balances that either already expired or are about to expire before the new rules take effect. To address this, the amendments include a transitional provision.​

If your credit balances expired before January 1, 2026, or will expire within one year from that date, you have a special one-year window starting January 1, 2026, to submit those refund requests. That means you have until December 31, 2026, to file claims that would otherwise be time-barred.​

There’s even more flexibility for voluntary disclosures related to such requests. These may be submitted within two years from the filing date when the Federal Tax Authority hasn’t yet issued a decision. This extended window gives businesses breathing room to review their records and correct any past oversights.​

The FTA’s Audit Powers Just Got Stronger

While the five-year limitation period provides certainty for most situations, the amendments include an important exception. The Federal Tax Authority can now open audits or issue assessments even after the ordinary limitation period expires in certain circumstances.​

When does this apply? Specifically when refund requests are submitted close to the limitation cutoff. This provision aims to protect the government’s financial interests while maintaining the five-year framework as the primary rule.​

What this means practically is that if you’re filing refund requests right before the deadline, you should preserve all audit evidence and be prepared to respond to potential audit inquiries even after the standard limitation period expires.​

Your Suppliers’ Legitimacy is Now Your Problem

One of the more significant changes relates to input tax deductions. The Federal Tax Authority now has explicit power to deny input tax deductions where it determines that a supply forms part of a tax evasion arrangement.​

This isn’t just about catching deliberate tax cheats. It places a responsibility on businesses to verify the legitimacy and integrity of their suppliers before claiming input tax, in accordance with FTA procedures.​

If you’re purchasing goods or services from a vendor involved in tax evasion—even if you had no knowledge of their activities—you could find your input tax claims denied. This makes supplier due diligence not just good business practice but a tax compliance necessity.​

Businesses with high volumes of input tax claims or elevated counterparty risk should particularly strengthen their supplier verification procedures.​

Reverse Charge Gets Simpler (With a Catch)

There’s some good news on administrative simplification. Self-invoicing is no longer required where reverse charge applies. This removes what has been, for many businesses, an unnecessarily complex administrative requirement.​

However, there’s an important condition: supporting documents must still be retained according to Executive Regulation standards. So while you’re spared the self-invoicing paperwork, you can’t reduce your documentation standards. Companies need to update their record retention policies to ensure they’re meeting these requirements.​

The FTA Can Now Issue Rules That Everyone Must Follow

Perhaps the most interesting development is that the Federal Tax Authority now has the ability to issue official directions that are binding—not just on taxpayers, but on the authority itself.​

This might seem like a minor procedural change, but it’s actually quite significant. The stated purpose is to achieve more consistent interpretation and application of tax law. In practical terms, this means when the FTA issues binding directions on how a particular tax provision should be interpreted, both businesses and tax officials must follow that interpretation.​

This should reduce the frustrating situations where different tax officials apply rules differently or where the FTA’s informal guidance conflicts with how they later enforce the rules. Once binding directions are published, there’s clarity that everyone must respect.​

Businesses should monitor for these FTA directions and update their internal guidance and controls when binding directions are published.​

What You Should Do Right Now

The effective date is less than two weeks away, and some of these changes require immediate action. Here’s what finance and tax teams should prioritize:

• Review Your Unclaimed Credits

Compile a ledger of all outstanding credit balances and determine which fall within the new five-year rule or the transitional window. Don’t assume you know what’s there—actually review your records systematically.​

• File Eligible Refund Requests

If you have refunds eligible under the transitional rules, prepare and submit those requests within the one-year window. Keep comprehensive evidence supporting your reconciliations and voluntary disclosures. This isn’t something to leave until late 2026.​

• Update Your Reverse Charge Procedures

Remove self-invoicing requirements where appropriate, but ensure supporting documents are being stored according to Executive Regulation standards. This requires updating both your accounting procedures and your document retention systems.​

• Strengthen Supplier Verification

Enhance your supplier due diligence procedures, particularly for transactions involving high volumes of input tax claims or where counterparty risk is elevated. This might mean implementing new vendor verification processes or strengthening existing ones.​

• Preserve Audit Documentation

If you’ve submitted or plan to submit refund requests near limitation deadlines, preserve all audit evidence and prepare to respond to potential post-limitation audit inquiries.​

• Monitor FTA Guidance

Set up a system to track FTA directions and any additional guidance published after January 1, 2026, and establish a process to revise your compliance procedures accordingly.​

The Bigger Picture

According to the Ministry of Finance, these changes are designed to enhance the efficiency of the tax system and strengthen confidence in the business environment. The amendments support administrative clarity, promote fairness, and provide more structured processes for refunds and audit activity.​

They also aim to bring the UAE’s tax framework closer to international best practices in managing limitation periods, refund timelines, and compliance oversight. For businesses, this means operating in a more predictable tax environment with clearer rules—but also one with stricter deadlines and enhanced enforcement mechanisms.​

The January 1, 2026, effective date isn’t arbitrary. It gives businesses time to prepare, but that preparation time is rapidly running out. Companies that act now to review their tax positions, claim eligible refunds, and strengthen their compliance procedures will be well-positioned for these changes. Those that delay may find themselves locked out of legitimate refund claims or facing enhanced scrutiny from the FTA.

Need Help Navigating These Tax Changes?

At JSB Incorporation, we help businesses maintain compliance with UAE tax regulations while maximizing legitimate tax benefits. Whether you need assistance reviewing unclaimed VAT credits, strengthening supplier verification procedures, or ensuring your documentation meets new requirements, our team can help.

Contact us to discuss how these January 2026 changes affect your business and what steps you should take before the deadline.