In October last year, the UAE’s Ministry of Finance issued Federal Decree Law no. 16 and Federal Decree Law no. 17 (for tax procedures) amending the VAT law and Tax Procedure Law of the country. The changes came into effect on 1st January 2026.
TAX PROCEDURE LAW
The recent amendment brought to the Federal Decree-Law no. 28 of 2022, have made the following changes:
1. Extended limitation period for tax audits and assessments: the limitation has been increased from five years to fifteen years in cases involving tax evasion or failure to register for tax purposes. The increased period of limitation will ensure that the Federal Tax Authority (FTA) has adequate time to investigate such cases and discourage non-compliance with laws.
2. Voluntary disclosures: The taxpayer upon discovery of error or omission where there is no difference in the amount of due tax shall have to make voluntary disclosures to the in cases specified by them.
3. Tax Refund Timelines: If tax refunds are not claimed within 5 years, the new framework provides for lapse of right. Business was earlier allowed to carry forward unused credits indefinitely.
4. FTA Directives: The new amendments give the FTA power to issue binding decisions or directives on application of the provisions of the Tax Procedure Law.
CHANGES TO THE VAT LAW
The recent amendment brough to the Federal Decree Law no. 8 of 2017 on value added tax (UAE VAT law) have made the following changes:
1. Time limit on carrying forward excess input VAT: The update law imposes a period of limitation on claiming the recovery of the input tax which can now be carried forward for maximum of five years. This means that any claim for excessive input tax must be recovered within 5 years.
2. Denial of Input VAT recovery linked to tax evasion: The tax authority can now disallow input tax deductions if the supply forms part of a chain linked to tax evasion and the taxpayer was aware or ought to have been aware of this connection while claiming the deduction. The taxpayer will be considered aware of the tax evasion connection if they fail to verify the validity and integrity of received supplies before claiming the input tax.
3. Removal of self-invoicing obligation: The amendments clarify that the taxpayer is not required to issue tax invoices to their selves when importing certain goods or services for their business use. This simplifies the compliance for the businesses and administrative process for the tax authority.
For more information, you may contact:
Thomas Paoletti
Fauzia Khan
“This article is for information purposes only and does not constitute legal or professional advice”.
