UAE to amend VAT rules from January 1

Changes to simplify tax procedures, says Ministry of Finance

The amendments aim to simplify tax procedures for taxpayers while ensuring transparency. Antonie Robertson/The National

The UAE plans to amend its value-added tax (VAT) rules to simplify tax procedures starting next year, as the country further bolsters its business-friendly environment.

The Ministry of Finance has issued Federal Decree-Law No. (16) of 2025 amending certain provisions of Federal Decree-Law No. (8) of 2017 on VAT, which will come into effect on January 1, 2026, it said in a statement on Wednesday.

“The amendments aim to simplify tax procedures for taxpayers while ensuring transparency and compliance with international standards,” the ministry said.

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The UAE introduced a 5 per cent VAT on the majority of goods and services in January 2018 as part of its plans to diversify the economy and reduce its dependence on oil. The UAE Central Bank has increased its 2025 growth forecast for the country’s economy from 4.4 per cent to 4.9 per cent, as a surge in non-oil activity drives momentum.

The announcement on Wednesday comes as part of the UAE’s continuing efforts to develop its tax system and improve administrative and regulatory efficiency.

“The amendments stipulate that taxable persons are relieved from issuing self-invoices when applying the reverse charge mechanism, while requiring them to retain supporting documents related to supply transactions,” the ministry said.

This provides clear audit evidence and reduces procedural burdens, it added. The amendments also establish a five-year time limit for submitting requests to reclaim any excess refundable tax after reconciliation has taken place.

After this period has elapsed, the right to reclaim the tax expires, preventing the build-up of old balances, which will strengthen financial certainty and promote fairness among taxpayers, according to the ministry.

Combating tax evasion

In a step to combat tax evasion, the amendments authorise the Federal Tax Authority (FTA) to deny the deduction of input tax if it determines that the supply forms part of a tax evasion arrangement.

Taxpayers are required to verify the legitimacy and integrity of supplies before deducting input tax, in line with the procedures and measures set out by the FTA. This approach reinforces shared responsibility, strengthens governing across the supply chain, and safeguards public revenue, the ministry said.

“These amendments support the UAE’s ongoing efforts to enhance the tax system, ensure a fair and transparent compliance environment, and promote both financial and administrative efficiency,” it said.