The UAE Ministry of Finance has issued Federal Decree-Law No. (16) of 2025, marking the most significant VAT  amendments since the introduction of VAT in 2018.

These amendments will simplify compliance in certain areas, while tightening regulatory control in others — making early preparation essential.

Whether you’re a business owner, CFO, accountant, or finance professional, understanding these changes today will help you stay compliant, avoid penalties, and plan ahead confidently.

Removal of Self-Invoicing for Reverse Charge Mechanism (RCM)

One of the most notable changes is the elimination of the self-tax invoice requirement under RCM.

What’s Changing?

✔ Previously, businesses applying RCM — especially for imports from non-resident suppliers — had to issue a tax invoice to themselves.
✔ From 1 January 2026, this self-invoicing requirement will no longer apply.

What You Must Do Instead

Although invoices won’t be required, businesses must maintain proper documentation, including:

• Commercial invoices
• Supplier contracts
• Documents evidencing supply and place of consumption

This update will reduce administrative workload, especially for businesses handling frequent cross-border transactions.

New 5-Year Limitation Period for VAT Refund Claims

The law introduces a five-year time limit for claiming VAT refund credit.

What’s New?

You now have up to five years from the end of the relevant tax period to submit refund claims for excess input VAT.

Why This Is Critical for Your Business

Businesses with accumulated input VAT — such as those involved in:

• Zero-rated exports
• Large capital or expansion projects
• Start-up phases with high initial costs

must review pending refunds immediately. Unclaimed balances beyond the 5-year window may be permanently forfeited.

Action Points

• Review past VAT returns and refund positions
• Identify any unclaimed excess recoverable VAT
• Prioritise refund submissions before limitation deadlines

Taking action now helps prevent write-offs and protect cash flow.

Stricter Controls on Input Tax Deduction to Combat Evasion

The amendments grant the Federal Tax Authority (FTA) enhanced powers to deny input tax deductions linked to tax evasion — even if the claimant is not directly involved.

What’s Changing?

The FTA can now reject input tax claims where the underlying supply is associated with evasive arrangements.

What This Means for Your Operations

Your business must reinforce:

• Supplier compliance checks
• VAT registration and license verification
• Documentation standards
• Supply-chain traceability and due diligence

A valid “good faith” defence will increasingly depend on your documentation quality and supplier vetting practices.

Recommended Next Steps

• Strengthen supplier onboarding and KYC processes
• Verify VAT TRN and trade license details of all key vendors
• Maintain detailed audit trails for high-risk or large-value transactions
• Conduct periodic supply-chain compliance reviews

What These 2026 VAT Amendments Mean for UAE Businesses

Key Advantages

Simplified RCM procedures with reduced paperwork
Clarity and structure around refund timelines
Enhanced trust and transparency across supply chains

Key Challenges

Tight timelines for claiming historical VAT refunds
Increased scrutiny on supplier compliance and documentation
Higher risk of disallowed input tax for poorly documented transactions

Early planning and process improvement will be essential for ensuring full compliance and avoiding penalties.

What Businesses Should Do Right Now

To prepare before the law takes effect:
Review outstanding VAT refund positions
Update ERP and accounting workflows for RCM changes
Strengthen supplier onboarding, KYC, and documentation processes
Train tax and finance teams on the new policies and deadlines

Avyanco Auditing LLC Is Here to Support You

At Avyanco Auditing LLC, our tax experts can help with:

• Comprehensive VAT compliance reviews
• VAT refund claim assessment and preparation
• Supplier due-diligence and VAT risk screening
• Impact assessment and policy updates
• Staff training on the 2026 VAT law changes

If you would like a tailored VAT impact assessment, reply to this email or contact us, and we will guide you through every step.