In brief
On 14 November 2025, the United Arab Emirates (UAE) Ministry of Finance (MoF) published two Federal Decree-Law No. 16 and 17 of 2025, amending both the UAE VAT Law and Tax Procedures Law (TPL), effective from 1 January 2026.
Both amendments materially reshape the VAT refund procedure, compliance timelines and statute limitation as well as the Federal Tax Authority’s (FTA) powers.
Detailed Information
Amendments to the UAE VAT Law
Key changes to the current VAT Law include:
- Clarification of the self-invoicing obligation in application of the reverse charge mechanism (“RCM”). Specifically, Article 48(1) of the VAT Law has been amended to clarify that taxpayers are not required to issue invoices to themselves for imports of certain goods or services used for business purposes under the RCM. That being said, it is important to note that self-invoicing may still be needed to support the VAT recovery position where supplier documentation is not available.
- Introduction of a five-year limitation period for excess recoverable input tax (Article 74(3)). Excess input tax now can only be carried forward or refunded within 5 years from the end of the tax period in which they were recorded. Once this deadline is passed, no offset or refund may be applied for. A transitional relief applies for businesses whose five-year period has already expired or will expire within one year after 1 January 2026; they have until 31 December 2026 to file pending refund requests.
- New anti-tax evasion conditions for input tax recovery have been added to the Law. Three clauses have been added to Article 54 of the VAT Law, adding anti-evasion provisions. Specifically, the Article now reflects that input tax recovery may be denied if the supply is part of an evasion chain and that the taxpayer knew or should have knowledge of this chain. Additionally, a taxpayer will be deemed aware of an evasion chain if they fail to conduct appropriate verification on the validity and integrity of the supply.
- Article 79 (bis) on statutory limitation has been repealed to align with the updated UAE TPL regime.
Amendments to the UAE TPL
Key changes to the current TPL include:
|
Relevant Articles |
Amendments |
|
Article 3(1) to (3) – Scope of application (new additions) |
Paragraph (1) adds that taxpayers with credit balances whose 5-year period expired before 1 January 2026 or will expire within 1 year from this date may request a refund or allocate the credit balance to outstanding liability. Additionally, paragraph (2) states that a Voluntary Disclosure may be filed within two years of the refund request submitted in application of (1), if the FTA has not yet issued a decision on the refund application. Lastly, paragraph (3) clarifies that the FTA may issue a tax audit or assessment notification in relation to a tax refund or credit allocation application even beyond the 5-year limitation period, provided the notification is issued within 2 years of the relevant request. Note that Article 3 includes the following transitional provision. Specifically, “[a] Taxpayer who is entitled to a refund of a Tax or credit balance, where the period of (5) five years has lapsed from the end of the Tax Period referred to in Clause 2 of Article 38 of Federal Decree-Law No. 28 of 2022 referred to above, may submit to the Authority an application for a refund of this credit balance or utilize it in the payment of Tax liabilities or Administrative Penalties, provided that this request is submitted within a period not exceeding a year from the effective date of this Decree-Law [1 January 2026].” |
|
Article 9(3) – Determination of Payable Tax |
The amended Article provides that the FTA’s powers to set off credits or overpayments against any tax liability or outstanding penalties is limited to a 5-year period from the end of the relevant tax period. |
|
Article 10(5) – Voluntary Disclosure |
Article 10(5) is amended to remove the obligation to file Voluntary Disclosure (“VDs”) for nil-impact or minor errors affecting the relevant Tax Return. It follows that VDs will only be required only for cases that the FTA will specifies subsequently. Taxpayers will be able to correct nil-impact and minor errors directly through the relevant Tax Returns. |
|
Article 38(3) to (6) – Application for Tax Refunds (new additions) |
Under the amended Article, it is specified that refund requests for credit balances (including credit available due to overpaid tax, return and VDs credits…) must be filed within 5 years from the end of the relevant tax period. If not submitted in time, the right to refund will be permanently forfeited. Additionally, if a credit arises from an FTA decision after the 5‑year window or in its last 90 days, the taxpayer has 1 year from the date the balance arose to file the refund. For other late or last‑90‑day credits, the taxpayer has 90 days to request a refund. Missing these windows would result in forfeiting the claim. |
|
Article 46 (1), (4) and (6) – Statute of Limitation |
The amended paragraph (1) confirms that the default 5-year limitation period for the FTA to conduct or issue a tax audit or assessment is retained, unless exceptional circumstances listed under paragraphs (4), (7) and (8) of the Article. Paragraph (4) covers the scenario where a refund claim is filed in the fifth year, in which case the FTA gets an extra 2 years from the claim date to audit/assess that claim. The amended clause 6 confirms the default 5-year limitation period for VDs. |
Key immediate next steps for businesses
- Businesses should strengthen compliance by implementing supplier and invoice due diligence (specifically in relation to RCM), and leverage upcoming UAE e-invoicing requirements to overhaul processes.
- Businesses should review all historical VAT refund positions and credit balances, submitting any pending claims before limitation periods expire.
To speak with us on any of the proposed changes to the UAE e-Invoicing system, or any tax matters, please contact one of the team members above.