UAE Tax Update: New VAT and Tax Procedure Rules Effective 1 January 2026

The UAE has issued Federal Decree-Law No. 16 of 2025 (VAT amendments) and Federal Decree-Law No. 17 of 2025 (Tax Procedures amendments), introducing a set of changes that further refine the UAE tax framework. While these reforms do not constitute a fundamental overhaul of the tax system, they introduce clearer structure, enhanced procedural discipline and strengthened enforcement mechanisms. Taken together, the amendments are intended to improve predictability, streamline compliance and reinforce due-diligence expectations for businesses operating in the UAE.

What is changing from 1 January 2026

The new rules introduce several targeted updates that will affect how businesses manage VAT and tax procedures in practice.

Reverse charge mechanism – simplified documentation

The requirement for self-invoicing under the reverse charge mechanism for certain VAT transactions has been removed. Instead, businesses must retain the prescribed supporting documentation. This change reduces administrative burden while improving audit clarity.

Five-year limitation period for VAT refunds

Refund claims for excess refundable tax must now be submitted within five years from the relevant tax period. Any unused refundable balance beyond this timeframe will lapse, placing greater emphasis on timely reconciliations and proactive credit management.

Expanded anti-evasion powers

The Federal Tax Authority now has broader powers to deny tax recovery or adjustments where transactions are linked to tax-evasion arrangements, or where a taxpayer knew or should have known of irregularities. This reinforces the importance of supply-chain scrutiny and counterparty due diligence.

More structured procedural rules

The updated Tax Procedures Law introduces clearer limitation periods, refined rules for refunds, adjustments and voluntary disclosures, and strengthened administrative processes. These changes are designed to increase legal certainty and consistency in tax administration.

Why this matters for businesses

Although incremental in nature, the amendments materially affect compliance discipline. Businesses will need to demonstrate stronger documentation standards, improved internal controls and greater awareness of limitation periods. The enhanced focus on anti-evasion also raises the bar for transaction-level due diligence and governance.

For groups with complex supply chains or historic VAT credit positions, early preparation will be critical to avoid lost recovery opportunities or increased regulatory exposure.

Preparing for the 2026 framework

Businesses should consider taking the following steps ahead of the effective date:

• Review VAT and corporate tax documentation, record-keeping and evidentiary requirements

• Assess outstanding refundable tax and credit balances before the new limitation period applies

• Strengthen supply-chain due diligence and transactional verification processes

• Update internal tax procedures to reflect clearer deadlines and expanded FTA oversight

At Swiss Group, tax specialists support businesses in navigating UAE tax compliance, aligning filing and reporting obligations, and preparing internal frameworks for the 2026 updates. Early review and adjustment can help ensure continuity, predictability and compliance as the new rules come into force.