TAX INSIGHTS - Legislative updates to Tax Procedures November 2025 (Simplified)

The UAE Ministry of Finance (MoF) has on 25^th November 2025 issued major amendments to the UAE’s VAT Law and Tax Procedures Law (Federal Decree Law No. 16 and 17 of 2025). These come into effect on 1 January 2026 and are part of the government’s ongoing push to streamline tax administration, improve transparency, and align with global standards. 

Here’s a breakdown of the changes, and what they mean for you –

Key Amendments at a Glance

📝 VAT Law (via Federal Decree-Law No. 16 of 2025)

Change	What’s New
I. Reverse-Charge & Self-Invoicing (Article 48-1)	Businesses no longer need to issue self-invoices to themselves when using the reverse-charge mechanism for imported goods/services for business use. Just hold on to supporting documents.
II. Limit on Excess Input Tax Recovery (Article 74-3)	If you have recoverable input tax credit (e.g. VAT paid on purchases) that results in a refund or credit, you now have up to 5 years from the end of the tax period to claim it. After that, the right expires.
III. Stricter Input Tax Recovery Rules (Article 54 Update)	The tax authority can deny input-tax claims if a supply is found to be part of a tax-evasion chain, or if you “should have known” about questionable supply integrity. This increases due-diligence responsibilities.

I. Reverse-Charge Procedures are Now Simpler

Businesses importing goods or services for business use will no longer be required to issue a self-invoice to themselves under the reverse-charge mechanism.What you must still do:

• Keep proper evidence (import docs, supplier invoices, contracts).

• Ensure the transaction is correctly recorded in your VAT return.

This reduces admin time while still ensuring transactions are properly traceable.

II. A New 5-Year Limit on Claiming Input VAT Refunds

If you have excess input VAT (i.e., you paid more VAT on purchases than you collected on sales), you now have up to 5 years after the end of the tax period to claim a refund or use the credit.

After that, the right to recover it expires.

What this means for companies:

• Credits sitting unused for years may no longer be claimable.

• You may need to reassess old periods to avoid losing refundable amounts.

III. Stricter Review of Input Tax Claims

The FTA will now have clearer authority to deny input-VAT claims if:

• A supply is found linked to tax evasion, or

• You “knew or should have known” there was an issue with the chain of supply.

This increases the responsibility of businesses to verify supplier legitimacy.

What you must do:

• Screen suppliers more carefully.

• Ensure invoices match genuine economic activity.

• Strengthen your internal controls.

📄 Transitional Relief, Enhanced Audit & Enforcement Framework (via Federal Decree-Law No. 17 of 2025)

For refunds or credits that are:

• Already expired under old rules, or

• Scheduled to expire within one year after 1 Jan 2026

Prepare and file refund claims before 1 Jan 2027, otherwise these amounts will be forfeited.

Enhanced Audit & Enforcement Framework

The amendments also strengthen the FTA’s ability to:

• Conduct tax audits

• Request additional information

• Issue clarifications on grey areas

• Oversee voluntary disclosures

While businesses may face more scrutiny, the framework is designed to bring predictability to audits and reduce disputes.

✅ What UAE Businesses Should Do Today

✔ Review All Old Input VAT Credits

Check if you have unused or unrecovered input tax, especially from early VAT years (2018–2021). Some of these might expire soon.

✔ Strengthen Supplier Due Diligence

Make sure your suppliers are compliant, licensed, and issuing clean documentation.

✔ Update Your Accounting Systems

Configure your ERP/accounting system to track:

• Age of VAT credits

• Reverse-charge entries without self-invoices

• Enhanced documentation storage

✔ Keep Records Audit-Ready

Invoices, contracts, proof of payment, import paperwork, retain these for at least 5 years.

✔ Evaluate Whether to Use or Claim Credits Sooner

If you have large credits, you may want to offset them before the new expiration rules tighten the timeline.

🛠 What Businesses Should Do Now: A Checklist

1. Review all outstanding input-tax credits or refunds and apply or offset them before the 5-year deadline.

2. Ensure your purchase invoices, especially imports & services under reverse-charge, are complete, authentic, and backed by proper documentation.

3. Update accounting systems and internal controls to flag “suspicious chains of supply”, especially if dealing with multiple suppliers, sometimes across jurisdictions.

4. Maintain full audit-ready records: invoices, contract copies, import proofs, payment records, for at least 5 years.

5. For businesses with existing VAT credits, consider whether to optimize usage now rather than risk expiry.

🔎 Key Takeaway

The 2026 amendments are a blend of simplification and stricter control. On one hand, businesses benefit from reduced paperwork (e.g., reverse-charge self-invoicing). On the other hand, tax credits, refunds, and supplier-related input claims will be under much sharper scrutiny.

The companies that prepare now will enjoy smoother compliance, fewer risks, and improved cash-flow efficiency.

📌 Need Help Making Sense of It All?

At Arzonell Accounting & Tax, we’re closely tracking these legislative changes. We can help you structure your accounting to meet the new rules, and prepare a solid compliance process so you don’t miss deadlines, avoid risks, and keep reclaiming what’s rightfully yours.

At Arzonell, we help businesses:

• Review their VAT history

• Secure eligible refunds before expiry

• Strengthen compliance frameworks

• Update processes for the 2026 amendments

• Reduce the risk of penalties or rejected claims

Reach out to us for a full compliance review and guidance tailored to your business.

Reach out to us: info@arzonell.com | +971 52 191 5973