This article discusses all of the major changes to the VAT system in the UAE from January 2026 onwards. Below each paragraph is a short, convenient sentence for you to skim if you don’t want to read the full thing. There is also a section briefly discussing the upcoming e-invoicing reform being rolled out in mid-2026.
It’s important to note that the VAT rate (5%) remains unchanged, and zero-rated/exempt supplies remain as before. These changes focus on procedure, timing, and compliance, NOT rates.
Reverse Charge Transactions Changes
Under the original VAT system introduced in January 2018, businesses had to account for VAT via invoices, with specific rules for issuance and record-keeping. The reverse charge mechanism (RCM) required companies to issue self-invoices for certain cross-border supplies or purchases from unregistered suppliers, which added extra administrative work. As of January 2026, however, this is no longer the case. Businesses no longer need to issue self-invoices, but they must retain standard supporting documents like supplier invoices, contracts, and customs paperwork. This is good news! It promotes strong record-keeping, rather than creating the burden of additional self-made paperwork.
Key point: Businesses no longer need to issue self-invoices, and instead just need to keep standard supporting documents to file for VAT credits. Bear in mind that the FTA expects the original supplier documents as proof of the transaction – in some cases, copies or scans may not meet compliance requirements.
Five-Year Deadline for Claiming VAT Refunds
In the past, there was no clearly defined time limit on when a business could claim excess VAT credits or refunds after reconciling their accounts. This has been changed: businesses must now claim these credits within five years of the end of the relevant tax period.
Key point: It’s advisable to plan ahead for dormant tax credits to ensure that your business doesn’t miss out on a lower tax bill.
Stronger Anti-Evasion Power for the FTA
This is one of the most important changes in the UAE in 2026. Previously, input VAT was generally recoverable as long as a valid tax invoice was presented, even if the supplier later violated VAT rules. However, the FTA now has the power to deny input VAT recovery if it determines that the transaction was connected to tax evasion and the buyer either knew, or should have known. This makes it all the more important for business owners to vet new suppliers through checking TRNs – or maintaining due diligence logs with supplier verification, transaction checks, regular monitoring, and an audit trail.
Key point: Businesses need to be more diligent in verifying the legitimacy of their suppliers to reduce fraud risk.
UAE VAT Audit & Procedure Rules Aligned with Tax Procedures Law
Previously, VAT audit and procedural rules were scattered throughout multiple sources, including VAT law and Tax Procedures Law. As of January 2026, all of these rules are now consolidated in the Tax Procedures law, making it easier for businesses to review a single, consistent framework.
Key point: Businesses should consult the Tax Procedures Law for all VAT deadlines, corrections, and audit procedures to ensure full compliance.
E-Invoicing (Effective 2026-2027)
While not a part of the VAT law amendments themselves, e-invoicing will change how VAT invoicing works in the UAE. Structured electronic invoices will be replacing Paper and PDF ones that are being exchanged between businesses and the FTA, one of the most significant digital tax compliance shifts that we’ve seen in over a decade. The system will be rolled out in phases starting in mid-2026, with mandatory compliance in 2027, giving businesses time to prepare.
Key point: Businesses will need to update their systems and processes to handle structured electronic invoices moving into 2027. With how many changes are happening to VAT in the UAE in 2026, it is recommended to hire an expert to guide your company through the process, learn more here!
We will be posting a dedicated article discussing all of the changes around E-Invoicing as well.