UAE has recently issued the following Federal-Decree Laws (“the Amended Laws”) amending some key provisions of the UAE VAT Decree-Law and the Tax Procedures Law.
- Federal Decree Law No. 16 of 2025 dated 01 October 2025 (“the Amended VAT Law”) –effective from 01 January 2026
- Federal Decree Law No. 17 of 2025 dated 01 October 2025 (“the Amended Tax Procedures Law”) –effective from 01 January 2026
The key changes in the Amended Laws are summarized below
Amendments in the UAE VAT Law (Federal Decree Law No. 16 of 2025)
|
S.No |
Article |
Description |
|
1 |
Article 48: Removal of Self-Invoicing requirements on imports |
To simplify the compliance burden and reduce administrative process, the importers are relieved from the obligation of issuing self-tax invoice in case of import of goods or services. |
|
2 |
Article 54 (bis): Restriction of Input Tax recovery on tax evasion scenario |
Input tax deductions will be disallowed if:
The taxpayer will be considered to be aware if they fail to verify the validity and integrity of the supplies before claiming the Input Tax deduction. |
|
3 |
Article 74 (3): Time limit set for carry forward of the excess recoverable tax |
Excess recoverable input tax can be carried forward for a period not exceeding 5 years from the end of the Tax period in which it arose.
If the taxpayer fails to claim the refunds within the stipulated time limit, the right to claim will lapse and may not be used to settle against any Tax liabilities |
|
4 |
Article 79 (bis): Statute of Limitation revoked |
Statute of limitation article has been repealed avoid any conflicts, as the same was already provided in the Tax Procedures Law |
Amendments in the Tax Procedures Law (Federal Decree Law No. 17 of 2025)
|
S.No |
Article |
Description |
|
1 |
Article 9 (3): Time limit for the refunds of overpaid tax Determination of Payable Tax |
New provision introduced defining a time limit for refund of overpaid tax. An amount paid exceeds the amount due, the excess may be refunded only if the taxpayer submits a request within five years from the end of the relevant tax period
The FTA must apply excess input tax credits/ overpayments to any tax or penalty obligation within five years; else, the FTA may not have the right to set off the excess input tax with tax obligations |
|
2 |
Article 10 (5): Correction of errors |
Voluntary Disclosure will no longer be mandatory for all errors and will only be required for cases that the FTA specifies and notified to the taxpayer. For other errors (i.e.,non-specified cases), corrections shall be via the tax return.
This would reduce the administrative burden and penalties, since earlier a taxpayer was required to file a voluntary disclosure even where an error had no effect on the payable tax |
|
3 |
Article 38: Refund of Credit Balances |
A five year limitation has been specified for requesting refund of credit balance
The taxpayer is required to submit the request within five years from the end of the tax period to which the balance relates, else the unclaimed refunds would lapse |
|
4 |
Article 46: Revised Limitation Periods |
Limitation of audit by the FTA remains five years, but expanded exceptions allow audits beyond this timeframe in cases where taxpayers submit refund claims in the fifth year of the limitation period. In these cases, the FTA has an additional two years to audit the refund claim from the date of submission of that claim |
|
5 |
Article 3: Transitional Relief (additional provision) |
Taxpayers whose five-year refund claim period has expired or will expire within one year from 1 January 2026, can still request a refund but the said request has to be made within one year from January 01, 2026.
Accordingly, for tax years 2018–2020, businesses have until December 31, 2026 to claim outstanding refunds |
Way Forward
Businesses should immediately review all historical VAT refund positions and credit balances and submit pending refund applications within the prescribed limits. It is also imperative that businesses should ensure that a proper diligence is undertaken for the suppliers and vendor invoices to avoid disallowance of input tax credit.