As we approach the year-end, it is essential to look ahead and prepare for the upcoming year. The UAE is famous for its attractive and transparent business environment. Therefore, there are a series of updates in the tax laws that improve the balance between the taxpayer and the authority. There are changes in key tax rules applicable from 1st January 2026 in the UAE. The related legislation is provided under Federal Decree Laws No. 16 & 17 of 2025. These changes are part of the UAE’s continuous efforts to enhance the efficiency of the tax system and strengthen transparency in tax transactions.
Key Changes in Tax Rules from 1 January 2026
There are updates in two areas of taxation:
1) Tax procedures
2) VAT law
Changes in the Tax Procedures Law
The Ministry of Finance has announced the issuance of Federal Decree-Law No. (17) of 2025. This law amends certain provisions of Federal Decree-Law No. (28) of 2022 on Tax Procedures. It will come into effect on 1 January 2026.
- The amendment aims to provide a transparent and organized legal framework for tax responsibilities and procedures. This includes the regulation of the timeframe for claiming refunds of credit balances from the FTA. This, in turn, will ensure clarity between the rights and obligations of both the taxpayer and the FTA. Thus, there will be higher financial discipline.
- The credit balance can arise due to overpayment, tax returns, voluntary disclosures, and other reasons.
- As per the amendment, there is a specified time period for claiming refunds. It is a maximum of five years from the end of the relevant tax period to request the refund of a credit balance from FTA or to use it against tax liabilities.
- However, there is some flexibility for specific cases if the credit balance arose after five years or in the last 90 days of the 5-year window. In this case, the taxpayer can submit a refund request within the stipulated timeframe.
There are certain other changes in the tax procedures law; however, there is limited information available at this time. We will provide a detailed blog on this topic when further information is available.
Changes in VAT Law
The Ministry of Finance has announced the issuance of Federal Decree-Law No. (16) of 2025. This will amend certain provisions of Federal Decree-Law No. (8) of 2017 on Value Added Tax. The amended law will enter into force as of January 1, 2026.
- The primary objective of this amendment is to align the VAT law with international practices while ensuring simplification and transparency.
- The amendment clarifies that taxable persons are not required to issue self-invoices when applying the reverse charge mechanism. For instance, when importing goods and services for own business use. This, in turn, will enhance administrative efficiency and also provide a clear path towards audit evidence.
- Furthermore, there is now a five-year time limit for submitting requests to claim excess refundable tax after the reconciliation process. After this period, there is no right to claim refunds. As a result, there will be higher certainty and clarity in the refund process.
- To counter tax evasion, the law now authorizes FTA to reject the deduction of input tax for a supply if it determines that there is a tax-evasion arrangement.
- Thus, taxpayers must verify the credibility and legitimacy of the supplies before deducting input tax.
The changes in key value-added tax rules reinforce shared responsibility between the taxpayer and FTA, enhance governance, and protect public revenue.
Summary
The UAE’s ongoing efforts to enhance the efficiency, fairness, and effectiveness of the tax system are evident through current changes in key tax rules. These are effective from 1 January 2026. The aim is to ensure a transparent compliance environment while promoting financial and administrative efficiency. As a result, there will be higher support for the sustainability of public resources and higher competitiveness of the UAE economy.
To summarize, the key changes are as follows:
- Concerning the tax procedures, the maximum time period to claim refunds of credit balances from FTA is five years.
- There is flexibility if the credit balance arose after the five years or in the last 90 days.
- With respect to VAT Law, firms are not required to issue self-invoices when applying the reverse charge mechanism.
- To claim an excess refundable tax, the maximum time limit is five years after the completion of the reconciliation process.
- FTA can now reject the deduction of input VAT for a supply if it determines that there is a tax evasion arrangement.
Creative Zone Tax & Accounting (CZTA)
At CZTA, we always strive to keep our clients updated with the changes in key tax rules in the UAE. However, the written information is mere information; the practicality is different. Therefore, we recommend consulting an expert to discuss how these changes will impact your business and compliance responsibilities. Let’s connect and make a tailor-made solution specific to your business. Contact us today.
