The UAE’s VAT framework continues to evolve as part of the government’s broader effort to strengthen tax governance, enhance transparency, and align with international best practices. With the introduction of recent amendments to the UAE VAT Decree-Law and the Tax Procedures Law, businesses must reassess how they manage VAT compliance, documentation, and risk.
These amendments are not merely technical updates. They directly impact how VAT-registered businesses file returns, claim refunds, deduct input tax, and respond to Federal Tax Authority (FTA) audits. For this reason, proactive compliance supported by reliable VAT services in UAE has become more important than ever.
Overview of UAE VAT Decree-Law Amendments
Since VAT was introduced in the UAE in 2018, the regulatory framework has steadily matured. The latest amendments reflect the UAE’s commitment to:
These changes aim to strike a balance between easing procedural burdens and strengthening enforcement mechanisms. Businesses that adapt early, especially with the support of professional VAT services in Dubai, will be better positioned to avoid penalties and operational disruptions.
No Need to Issue Self-Invoice under Reverse Charge Mechanism (RCM) – Article 48 (1)
One of the most practical and business-friendly amendments relates to the Reverse Charge Mechanism (RCM).
What has changed?
Previously, VAT-registered businesses were required to issue a self-invoice when importing goods or services subject to RCM. Under the amended Article 48 (1), this requirement has been removed.
What remains mandatory?
While self-invoicing is no longer required, businesses must still retain:
- Valid supplier invoices
- Import documentation
- Any supporting records prescribed under the Executive Regulations
Why does this matter?
This change significantly reduces administrative and procedural burdens, particularly for businesses with frequent cross-border transactions. However, failure to maintain proper records can still lead to compliance issues during FTA audits.
Companies relying on expert VAT services in Dubai can ensure that documentation processes remain compliant while benefiting from this simplification.
Five-Year Time Limit for Claiming VAT Refund – Article 74 (3)
The amended VAT law introduces a clear statutory deadline for VAT recovery.
Key updates -
Businesses now have a five-year time limit to:
- Offset excess recoverable input VAT, or
- Apply for VAT refunds
Once this limitation period expires, the right to recover VAT is lost.
Business implications
This amendment directly affects:
- Cash-flow management
- VAT reconciliation processes
- Long-term financial planning
Without regular reviews, businesses risk losing legitimate VAT refunds simply due to missed timelines. Periodic VAT assessments conducted through professional VAT registration services help ensure that recoverable VAT is identified and claimed on time.
Stricter Input Tax Deduction Rules and Compliance Measures – Article 54
The amendments to Article 54 significantly strengthen the FTA’s authority in relation to input tax deductions.
Expanded FTA powers
The FTA can now deny input VAT deductions if:
- Transactions are linked to tax evasion arrangements
- The taxpayer had actual knowledge or deemed knowledge of non-compliance within the supply chain
What does “deemed knowledge” mean?
Businesses are expected to exercise enhanced due diligence when dealing with suppliers. Ignorance is no longer a sufficient defence if warning signs were reasonably identifiable.
Compliance impact
This places greater responsibility on businesses to:
- Verify supplier legitimacy
- Assess transaction substance
- Maintain robust audit trails
Engaging reliable VAT services in UAE becomes essential to mitigate risks and ensure that VAT claims are defensible under scrutiny.
Updates to the UAE Tax Procedures Law
Alongside VAT-specific amendments, changes to the Tax Procedures Law further strengthen enforcement and governance.
Determination of Payable Tax – Article 9(3)
The Federal Tax Authority (FTA) is now allowed to adjust or use a taxpayer’s credit balance or overpaid tax against outstanding tax liabilities within five years from the end of the relevant tax period.
Voluntary Disclosure – Article 10(5)
Voluntary Disclosure is mandatory only for specific errors or omissions identified by the FTA.
For other types of errors, taxpayers may correct them in their future tax returns without submitting a Voluntary Disclosure.
Tax Refund – Article 38
Clause 1:
Taxpayers can apply for a refund of their credit balance if the amount is more than any outstanding tax dues or administrative penalties.
Clause 2:
Refund applications for input tax credit balances must be submitted within five years from the end of the tax period in which the credit balance was generated.
Clause 3:
If the credit balance results from an FTA decision issued after the five-year limit or within the final 90 days of that period, the taxpayer may apply for a refund within one year from the date the credit balance arises.
Clause 4:
In all other cases where a credit balance arises after the five-year limit or within the last 90 days of that period, the refund application must be submitted within 90 days from the date the credit balance arises.
Clause 5:
The FTA must review refund applications and inform the taxpayer whether the request is approved or rejected.
Clause 6:
If a refund request is not submitted within the specified time limits, the taxpayer loses the right to claim the refund for overpaid tax or credit balance.
Statute of Limitation – Article 46
Clause 1:
The Federal Tax Authority (FTA) cannot conduct a tax audit or issue a tax assessment after five years from the end of the relevant tax period, except in specific cases allowed by law.
Clause 4:
If a taxpayer submits a refund claim during the fifth year after the end of the relevant tax period, the FTA may still carry out an audit or issue a tax assessment related to that claim even after the five-year limit.
However, such an audit or assessment must be completed within two years from the date the refund claim was submitted.
Clause 6:
A Voluntary Disclosure may be submitted after the five-year limitation period if it relates to a refund application for which the FTA has not yet issued a decision.
Issue of Directives – Article 54 (Bis)
The FTA is officially authorized to issue directives and guidelines on the implementation of the Tax Procedures Law.
Additional Provisions – Article 3
Taxpayers who are eligible for a tax refund or credit balance but whose five-year claim period has already expired may still apply to the FTA or use the credit to settle tax liabilities, provided the application is submitted within one year from the effective date of the Decree-Law.
Key procedural changes include:
- Expanded FTA audit, investigation, and assessment powers
- Stronger documentation and record-keeping obligations
- Revised timelines for objections, reassessments, penalties, and refunds
- Greater emphasis on transparency and shared compliance responsibility
These updates reinforce the need for structured internal VAT controls and consistent advisory support from experienced VAT services in Dubai.
Business Impact and Compliance Considerations
The combined effect of these amendments results in a more disciplined VAT environment.
What businesses should focus on:
- Increased scrutiny of VAT returns and refund claims
- Stronger internal controls and transaction validation
- Regular VAT health checks to identify risks early
Conclusion
The amendments to the UAE VAT Decree-Law and Tax Procedures Law mark a significant step in the evolution of the country’s tax framework. While certain changes reduce administrative burdens, others introduce stricter compliance expectations and enforcement mechanisms.
Timely compliance, accurate documentation, and informed VAT decision-making are now essential. Businesses that engage expert VAT services in the UAE can navigate legislative changes with confidence, minimise risk, and ensure ongoing compliance. With the support of reliable VAT services in Dubai, companies can avoid penalties and strengthen internal controls, while specialised VAT registration services help maintain long-term tax efficiency.
At Reyson Badger, we support businesses with end-to-end VAT advisory, compliance, and registration services, helping you stay compliant while focusing on growth.
