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Amendments to the UAE VAT Law in 2026

Amendments to the UAE VAT Law in 2026 - Makebiz

In recent years, the United Arab Emirates has been actively developing its tax system, and one of the key initiatives has been the amendment of the VAT Law (Federal Decree-Law No. 16 of 2025). They are aimed at simplifying the application of the reverse charge mechanism for B2B transactions, as well as clarifying the rules for refunding overpaid value-added tax. In this article, we will look at the main aspects of these innovations and their impact on business in the country.

1. Simplification of the application of the reverse accrual mechanism

One of the significant amendments is to simplify the application of the reverse accrual mechanism for B2B transactions, especially with regard to the import of services and intangible assets. This means that companies receiving services from foreign suppliers may not pay VAT immediately, but reflect it in their declarations. This measure significantly eases the tax burden on exporters and firms engaged in international trade, as it reduces the need for pre-financing of tax payments.

2. Establishment of a 5-year limitation period for VAT refund

The innovation allows businesses to manage their tax obligations more effectively, as they can expect to receive a tax refund over a longer period of time.

Previously, in case of errors or overpayments, organizations could face tight deadlines, which created additional risks and uncertainties.

3. The right of the FTA to refuse an entry tax credit

According to the new amendments, the FTA now has the right to refuse to grant an entry tax credit if the transaction involves tax evasion. This innovation is aimed at combating VAT fraud and protecting honest taxpayers. Organizations should be especially attentive to documenting their transactions and justifying the right to entry VAT in order to avoid possible refusals.

4. Notification of major transactions

Companies are required to inform the tax service about transactions exceeding the established threshold, which makes it possible to more effectively control large financial flows and prevent tax evasion.

5. Expanding documentation responsibilities

The amendments also expand the responsibilities of companies in documenting and justifying the right to input VAT. This means that businesses will have to keep records of their operations more carefully and keep the relevant documents confirming the right to a tax refund. This approach helps to increase transparency and reduce tax uncertainty, which, in turn, creates more favorable business conditions.

In general, the amendments to the UAE VAT Law are aimed at simplifying the tax system and creating a more predictable business environment. Setting a reasonable limitation period for tax refunds, as well as clear rules for documenting transactions, will help reduce the burden on businesses and reduce the risks associated with tax audits.

Thus, changes in UAE legislation can be an important step towards improving the investment climate and attracting new entrepreneurs to the country. Organizations that are ready to adapt to new requirements and implement effective accounting systems will be able to take full advantage of the innovations and strengthen their market position.

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