The amended law introduces a five year limit from the end of the relevant tax period to submit a refund request or use the balance to offset future tax liabilities. Once this period expires, the right to reclaim the credit will lapse, unless specific exceptional conditions apply.
10 December, 2025
UAE VAT Law Amendments to Take Effect from January 2026: Credit Refunds and Key Compliance Changes Explained
The Ministry of Finance has officially announced the implementation of important amendments to the UAE Value Added Tax Law, which will come into force from 1 January 2026. These amendments are introduced under Federal Decree Law No. 16 of 2025, amending certain provisions of Federal Decree Law No. 8 of 2017 on Value Added Tax. The changes aim to improve tax administration, enhance transparency, and strengthen compliance across the UAE.
One of the most significant developments under these amendments is the introduction of a clear legal right for taxpayers to claim refunds on excess VAT credit balances, subject to prescribed conditions and timelines.
Credit Refunds from January 2026: What Has Changed
From January 2026 onwards, taxpayers who have accumulated VAT credit balances with the Federal Tax Authority will be allowed to formally request refunds within a legally defined timeframe. The amended law introduces a five year limit from the end of the relevant tax period to submit a refund request or use the balance to offset future tax liabilities. Once this period expires, the right to reclaim the credit will lapse, unless specific exceptional conditions apply.
Taxpayers whose five year period expired before 1 January 2026 or is set to expire within one year from that date will also be granted a special window to submit refund requests within one year from January 2026. In addition, voluntary disclosures related to such refund requests may be submitted within two years, provided the Federal Tax Authority has not yet issued a decision.
Simplification of VAT Procedures and Reverse Charge Relief
Another key change under the 2026 amendments is the removal of the requirement for taxable persons to issue self invoices under the reverse charge mechanism. Instead, businesses will now be required to retain proper supporting documentation for relevant supply transactions as specified in the Executive Regulation. This change is aimed at reducing procedural burden while ensuring that audit evidence remains reliable and verifiable.
This step is expected to ease administrative workload for businesses that regularly deal with imports or cross border transactions while maintaining accountability.
Strengthened Oversight and Input Tax Controls
The amended law also grants enhanced authority to the Federal Tax Authority to deny input tax deductions in cases where supplies are found to be part of a tax evasion arrangement. Taxpayers are now legally required to verify the legitimacy and integrity of transactions before deducting input tax. This strengthens accountability across supply chains and protects public revenue from misuse.
Extended Tax Audit Powers in Specific Cases
The amendments also allow the Federal Tax Authority to conduct tax audits and issue tax assessments even after the standard limitation period in specific scenarios, particularly where refund requests are submitted in the final year of the limitation period. This ensures an appropriate balance between safeguarding taxpayer rights and preserving the State’s financial interests.
What This Means for Businesses and Taxpayers
These changes bring greater clarity for businesses managing VAT credit balances while ensuring that refund claims are made within structured legal timelines. Businesses with high input costs, delayed revenue cycles, or capital intensive operations are expected to benefit from improved access to VAT refunds. At the same time, stricter documentation requirements and transaction verification obligations mean that accurate accounting and compliance will be more important than ever.
The amendments also reflect the UAE’s broader focus on strengthening fiscal discipline, ensuring tax fairness, and maintaining confidence in the national tax system.
Conclusion
With the VAT law amendments coming into effect from January 2026, businesses must begin preparations well in advance to align their accounting systems, documentation practices, and refund planning with the updated legal framework. The introduction of structured VAT credit refunds, reverse charge procedural relief, and enhanced audit controls will have a direct impact on financial reporting and compliance across sectors.
At Malhotra Legal Consultancy, we regularly assist businesses with VAT compliance, credit reconciliations, refund eligibility reviews, and ongoing tax advisory services. If you require guidance on how these 2026 amendments may affect your business operations, our team is available to assist with clarity and compliance.
UAE VAT Law Amendments to Take Effect from January 2026: Credit Refunds and Key Compliance Changes Explained
The Ministry of Finance has officially announced the implementation of important amendments to the UAE Value Added Tax Law, which will come into force from 1 January 2026. These amendments are introduced under Federal Decree Law No. 16 of 2025, amending certain provisions of Federal Decree Law No. 8 of 2017 on Value Added Tax. The changes aim to improve tax administration, enhance transparency, and strengthen compliance across the UAE.
One of the most significant developments under these amendments is the introduction of a clear legal right for taxpayers to claim refunds on excess VAT credit balances, subject to prescribed conditions and timelines.
Credit Refunds from January 2026: What Has Changed
From January 2026 onwards, taxpayers who have accumulated VAT credit balances with the Federal Tax Authority will be allowed to formally request refunds within a legally defined timeframe. The amended law introduces a five year limit from the end of the relevant tax period to submit a refund request or use the balance to offset future tax liabilities. Once this period expires, the right to reclaim the credit will lapse, unless specific exceptional conditions apply.
Taxpayers whose five year period expired before 1 January 2026 or is set to expire within one year from that date will also be granted a special window to submit refund requests within one year from January 2026. In addition, voluntary disclosures related to such refund requests may be submitted within two years, provided the Federal Tax Authority has not yet issued a decision.
Simplification of VAT Procedures and Reverse Charge Relief
Another key change under the 2026 amendments is the removal of the requirement for taxable persons to issue self invoices under the reverse charge mechanism. Instead, businesses will now be required to retain proper supporting documentation for relevant supply transactions as specified in the Executive Regulation. This change is aimed at reducing procedural burden while ensuring that audit evidence remains reliable and verifiable.
This step is expected to ease administrative workload for businesses that regularly deal with imports or cross border transactions while maintaining accountability.
Strengthened Oversight and Input Tax Controls
The amended law also grants enhanced authority to the Federal Tax Authority to deny input tax deductions in cases where supplies are found to be part of a tax evasion arrangement. Taxpayers are now legally required to verify the legitimacy and integrity of transactions before deducting input tax. This strengthens accountability across supply chains and protects public revenue from misuse.
Extended Tax Audit Powers in Specific Cases
The amendments also allow the Federal Tax Authority to conduct tax audits and issue tax assessments even after the standard limitation period in specific scenarios, particularly where refund requests are submitted in the final year of the limitation period. This ensures an appropriate balance between safeguarding taxpayer rights and preserving the State’s financial interests.
What This Means for Businesses and Taxpayers
These changes bring greater clarity for businesses managing VAT credit balances while ensuring that refund claims are made within structured legal timelines. Businesses with high input costs, delayed revenue cycles, or capital intensive operations are expected to benefit from improved access to VAT refunds. At the same time, stricter documentation requirements and transaction verification obligations mean that accurate accounting and compliance will be more important than ever.
The amendments also reflect the UAE’s broader focus on strengthening fiscal discipline, ensuring tax fairness, and maintaining confidence in the national tax system.
Conclusion
With the VAT law amendments coming into effect from January 2026, businesses must begin preparations well in advance to align their accounting systems, documentation practices, and refund planning with the updated legal framework. The introduction of structured VAT credit refunds, reverse charge procedural relief, and enhanced audit controls will have a direct impact on financial reporting and compliance across sectors.
At Malhotra Legal Consultancy, we regularly assist businesses with VAT compliance, credit reconciliations, refund eligibility reviews, and ongoing tax advisory services. If you require guidance on how these 2026 amendments may affect your business operations, our team is available to assist with clarity and compliance.
UAE VAT Law Amendments to Take Effect from January 2026: Credit Refunds and Key Compliance Changes Explained
The Ministry of Finance has officially announced the implementation of important amendments to the UAE Value Added Tax Law, which will come into force from 1 January 2026. These amendments are introduced under Federal Decree Law No. 16 of 2025, amending certain provisions of Federal Decree Law No. 8 of 2017 on Value Added Tax. The changes aim to improve tax administration, enhance transparency, and strengthen compliance across the UAE.
One of the most significant developments under these amendments is the introduction of a clear legal right for taxpayers to claim refunds on excess VAT credit balances, subject to prescribed conditions and timelines.
Credit Refunds from January 2026: What Has Changed
From January 2026 onwards, taxpayers who have accumulated VAT credit balances with the Federal Tax Authority will be allowed to formally request refunds within a legally defined timeframe. The amended law introduces a five year limit from the end of the relevant tax period to submit a refund request or use the balance to offset future tax liabilities. Once this period expires, the right to reclaim the credit will lapse, unless specific exceptional conditions apply.
Taxpayers whose five year period expired before 1 January 2026 or is set to expire within one year from that date will also be granted a special window to submit refund requests within one year from January 2026. In addition, voluntary disclosures related to such refund requests may be submitted within two years, provided the Federal Tax Authority has not yet issued a decision.
Simplification of VAT Procedures and Reverse Charge Relief
Another key change under the 2026 amendments is the removal of the requirement for taxable persons to issue self invoices under the reverse charge mechanism. Instead, businesses will now be required to retain proper supporting documentation for relevant supply transactions as specified in the Executive Regulation. This change is aimed at reducing procedural burden while ensuring that audit evidence remains reliable and verifiable.
This step is expected to ease administrative workload for businesses that regularly deal with imports or cross border transactions while maintaining accountability.
Strengthened Oversight and Input Tax Controls
The amended law also grants enhanced authority to the Federal Tax Authority to deny input tax deductions in cases where supplies are found to be part of a tax evasion arrangement. Taxpayers are now legally required to verify the legitimacy and integrity of transactions before deducting input tax. This strengthens accountability across supply chains and protects public revenue from misuse.
Extended Tax Audit Powers in Specific Cases
The amendments also allow the Federal Tax Authority to conduct tax audits and issue tax assessments even after the standard limitation period in specific scenarios, particularly where refund requests are submitted in the final year of the limitation period. This ensures an appropriate balance between safeguarding taxpayer rights and preserving the State’s financial interests.
What This Means for Businesses and Taxpayers
These changes bring greater clarity for businesses managing VAT credit balances while ensuring that refund claims are made within structured legal timelines. Businesses with high input costs, delayed revenue cycles, or capital intensive operations are expected to benefit from improved access to VAT refunds. At the same time, stricter documentation requirements and transaction verification obligations mean that accurate accounting and compliance will be more important than ever.
The amendments also reflect the UAE’s broader focus on strengthening fiscal discipline, ensuring tax fairness, and maintaining confidence in the national tax system.
Conclusion
With the VAT law amendments coming into effect from January 2026, businesses must begin preparations well in advance to align their accounting systems, documentation practices, and refund planning with the updated legal framework. The introduction of structured VAT credit refunds, reverse charge procedural relief, and enhanced audit controls will have a direct impact on financial reporting and compliance across sectors.
At Malhotra Legal Consultancy, we regularly assist businesses with VAT compliance, credit reconciliations, refund eligibility reviews, and ongoing tax advisory services. If you require guidance on how these 2026 amendments may affect your business operations, our team is available to assist with clarity and compliance.
UAE VAT Law Amendments to Take Effect from January 2026: Credit Refunds and Key Compliance Changes Explained
The Ministry of Finance has officially announced the implementation of important amendments to the UAE Value Added Tax Law, which will come into force from 1 January 2026. These amendments are introduced under Federal Decree Law No. 16 of 2025, amending certain provisions of Federal Decree Law No. 8 of 2017 on Value Added Tax. The changes aim to improve tax administration, enhance transparency, and strengthen compliance across the UAE.
One of the most significant developments under these amendments is the introduction of a clear legal right for taxpayers to claim refunds on excess VAT credit balances, subject to prescribed conditions and timelines.
Credit Refunds from January 2026: What Has Changed
From January 2026 onwards, taxpayers who have accumulated VAT credit balances with the Federal Tax Authority will be allowed to formally request refunds within a legally defined timeframe. The amended law introduces a five year limit from the end of the relevant tax period to submit a refund request or use the balance to offset future tax liabilities. Once this period expires, the right to reclaim the credit will lapse, unless specific exceptional conditions apply.
Taxpayers whose five year period expired before 1 January 2026 or is set to expire within one year from that date will also be granted a special window to submit refund requests within one year from January 2026. In addition, voluntary disclosures related to such refund requests may be submitted within two years, provided the Federal Tax Authority has not yet issued a decision.
Simplification of VAT Procedures and Reverse Charge Relief
Another key change under the 2026 amendments is the removal of the requirement for taxable persons to issue self invoices under the reverse charge mechanism. Instead, businesses will now be required to retain proper supporting documentation for relevant supply transactions as specified in the Executive Regulation. This change is aimed at reducing procedural burden while ensuring that audit evidence remains reliable and verifiable.
This step is expected to ease administrative workload for businesses that regularly deal with imports or cross border transactions while maintaining accountability.
Strengthened Oversight and Input Tax Controls
The amended law also grants enhanced authority to the Federal Tax Authority to deny input tax deductions in cases where supplies are found to be part of a tax evasion arrangement. Taxpayers are now legally required to verify the legitimacy and integrity of transactions before deducting input tax. This strengthens accountability across supply chains and protects public revenue from misuse.
Extended Tax Audit Powers in Specific Cases
The amendments also allow the Federal Tax Authority to conduct tax audits and issue tax assessments even after the standard limitation period in specific scenarios, particularly where refund requests are submitted in the final year of the limitation period. This ensures an appropriate balance between safeguarding taxpayer rights and preserving the State’s financial interests.
What This Means for Businesses and Taxpayers
These changes bring greater clarity for businesses managing VAT credit balances while ensuring that refund claims are made within structured legal timelines. Businesses with high input costs, delayed revenue cycles, or capital intensive operations are expected to benefit from improved access to VAT refunds. At the same time, stricter documentation requirements and transaction verification obligations mean that accurate accounting and compliance will be more important than ever.
The amendments also reflect the UAE’s broader focus on strengthening fiscal discipline, ensuring tax fairness, and maintaining confidence in the national tax system.
Conclusion
With the VAT law amendments coming into effect from January 2026, businesses must begin preparations well in advance to align their accounting systems, documentation practices, and refund planning with the updated legal framework. The introduction of structured VAT credit refunds, reverse charge procedural relief, and enhanced audit controls will have a direct impact on financial reporting and compliance across sectors.
At Malhotra Legal Consultancy, we regularly assist businesses with VAT compliance, credit reconciliations, refund eligibility reviews, and ongoing tax advisory services. If you require guidance on how these 2026 amendments may affect your business operations, our team is available to assist with clarity and compliance.
