April 2026 · VAT · UAE
VAT Amendments Effective 1 January 2026: What Changed and What It Means
Federal Decree-Law 16 of 2025 reset the VAT framework on 1 January 2026. Refund claims now carry a five-year cap, reverse-charge self-invoicing is gone, and the FTA gained sharper anti-evasion powers. Here is the practitioner read on each.
The VAT framework that businesses were operating to in December 2025 is not the framework that applies today. Federal Decree-Law No. 16 of 2025 amended the Value Added Tax Law, and Federal Decree-Law No. 17 of 2025 amended the Tax Procedures Law, with both taking effect on 1 January 2026. The shape of the regime is unchanged. The mechanics on three significant points are different.
Refund claim window now capped at five years
VAT refund claims must now be filed within five years from the end of the relevant tax period. Anything older lapses permanently. Businesses that have accumulated input-VAT credit positions over several years without filing for refund need to act before the window closes on each tax period.
A transitional rule covers historic claims: any unrecovered input VAT for tax periods between 2018 and 2020 can still be claimed, but only if the refund application is submitted by 31 December 2026. After that date, the right is extinguished. For businesses sitting on legacy claims, the calendar is set.
Reverse charge: no more self-invoicing
Importers and recipients of reverse-charge supplies are no longer required to issue a tax invoice to themselves. This was always an administrative formality with no substantive effect, and the FTA agreed. The accounting entries still happen in the same way; the paper does not.
Anti-evasion powers around input VAT
The most consequential of the amendments. The FTA can now deny input VAT recovery where a supply was connected to tax evasion and the recipient knew, or should have known on the circumstances, that the transaction was improperly treated. The "should have known" test is broader than the "knew" test, and it puts the burden on buyers to apply commercial diligence to their supply chain.
What does this mean in practice? Round-tripping arrangements, supplier counterparties with no operating substance, and pricing materially out of line with market are now triggers for the recipient's own VAT exposure, not just the supplier's. The defensive position is documented diligence at supplier onboarding.
What businesses should do now
Three actions in the first half of 2026: audit your input-VAT credit position for any 2018-2020 tax periods sitting unclaimed, update procurement onboarding to capture supplier substance evidence, and review reverse-charge processes to drop the redundant self-invoice step. The first action carries a hard 31 December 2026 deadline; the others do not, but waiting until the next FTA enquiry forces the question is the wrong order to do it in.
If your business has VAT exposure that may be affected by the amendments, our VAT practice can run a focused review and surface the priority items. Initial consultations are complimentary.