Several UAE VAT rules changed in 2026. From 1 January, importers no longer issue reverse-charge self-invoices, VAT credit balances must be used or claimed within five years and the Federal Tax Authority (FTA) can refuse input tax linked to tax evasion; rules on metal scrap, penalties, supplier checks and staff benefits followed.

What are the new VAT rules in the UAE for 2026?

The main confirmed changes are: no self-invoice for reverse-charge imports, a five-year limit on VAT credit balances and input tax refusal for supplies linked to tax evasion (all from 1 January 2026), a metal scrap reverse charge from 14 January, revised penalties from 14 April and new input tax rules from 1 October 2026.

  • 1 January 2026: Federal Decree-Law No. 16 of 2025 (VAT Law) and Federal Decree-Law No. 17 of 2025 (Tax Procedures Law, now also allowing FTA directives binding on both the FTA and taxpayers).
  • 14 January 2026: Cabinet Decision No. 153 of 2025 (metal scrap).
  • 1 April 2026: Cabinet Decision No. 17 of 2026 (Tax Procedures Executive Regulation: voluntary disclosure and refund procedures, and two more years of record keeping while a refund claim is undecided).
  • 14 April 2026: Cabinet Decision No. 129 of 2025 (penalties).
  • 1 July 2026: Ministerial Decision No. 244 of 2025 (e-invoicing pilot and voluntary adoption).
  • 1 October 2026: FTA Decisions No. 13 of 2026 (supplier checks) and No. 17 of 2026 (staff benefits), and Cabinet Decision No. 149 of 2026 (VAT Executive Regulation, including composite supplies and no input tax on cash-paid supplies above a limit to be set by Ministerial decision; new apportionment rules from the first tax year starting after 1 October 2027).

Do I still issue a self-invoice under the reverse charge?

No, not for imports on or after 1 January 2026. Federal Decree-Law No. 16 of 2025 amended Article 48(1) of the VAT Law so that a business accounting for VAT on imported goods or services under the reverse charge no longer issues a tax invoice to itself. It must still account for the VAT and keep supporting documents.

Article 48(5) of the VAT Executive Regulation lists those documents: the supplier's invoice showing the details and consideration paid and, for imported goods, a customs statement showing their details and value.

What changed for VAT refunds and the time limits for claiming them?

From 1 January 2026, a VAT credit balance must be claimed as a refund, or used against tax or penalties, within five years from the end of the tax period in which it arose; after that the right lapses. Previously, the VAT Law carried an unclaimed excess forward.

Federal Decree-Laws No. 16 and No. 17 of 2025 made this change. In the FTA's example, a credit from the tax period ending 31 January 2026 can be used or refunded until 31 January 2031; any unused part then lapses.

If a balance arises after the five years, or in their last 90 days, a refund can still be claimed within one year of it arising where it results from an FTA decision, or within 90 days otherwise. For balances whose five-year period has already lapsed, a transitional rule allows a refund claim, or use of the balance, within one year from 1 January 2026; the Ministry of Finance says this also covers periods expiring within that year.

What checks must I make before claiming input tax?

Under Federal Decree-Law No. 16 of 2025, from 1 January 2026 the FTA can refuse input tax on a purchase linked to a tax-evasion supply chain where the buyer knew, or should have known. From 1 October 2026, FTA Decision No. 13 of 2026 sets the supplier and transaction checks to make and document before deducting input tax.

A buyer that did not verify the validity and integrity of its supplies before deducting is treated as having been required to know; the chain extends beyond direct suppliers. A business must:

  • verify a supplier's identity and place of business at first dealing, and again if not verified in the previous 12 months;
  • check risk indicators, such as more than two changes of address or key staff within 12 months, and keep a justified explanation if one applies;
  • if purchases from a supplier exceeded AED 375,000 in the previous 12 months, or are expected to in the next 12, obtain from the supplier a written confirmation from an authorised UAE bank that it has an account, and check public reviews and media coverage;
  • assess each supply's payment terms, pricing, fit with the supplier's licensed activity and, for goods, their origin;
  • document the checks and keep a written policy naming who is responsible.

Purchases under AED 10,000 excluding VAT can skip the checks, unless supplies from that supplier exceeded AED 100,000 in the previous 12 months or are expected to in the next 12.

Can I still recover VAT on staff benefits?

Only in defined cases. From 1 October 2026, the two main routes for recovering VAT on free goods or services for employees are where labour law makes the benefit mandatory, or a contract or documented policy provides it within the cases and conditions of FTA Decision No. 17 of 2026.

Cabinet Decision No. 149 of 2026 replaced the earlier contract-or-policy test, which turned on the employee's role and normal business practice. Employee accommodation now counts under the labour-law route only if Ministry of Human Resources and Emiratisation decisions or directives make it mandatory. The FTA's cases, each with further conditions, cover:

  • transport between home and work or client sites, with no cash alternative;
  • food and drink for staff living in remote areas without nearby facilities;
  • accommodation the work requires, and up to 30 days of temporary accommodation for new employees;
  • phones, airtime, data and home internet needed for work, under a documented usage policy;
  • business parking, under a documented reimbursement policy, with receipts kept.

Does the reverse charge now apply to metal scrap?

Yes. From 14 January 2026, under Cabinet Decision No. 153 of 2025, when a VAT-registered business buys metal scrap to resell or process, the buyer accounts for the VAT instead of the supplier, provided both sides complete set steps before the date of supply.

The buyer declares in writing that it is registered and is buying to resell or process. The supplier keeps the declarations, checks the buyer's TRN with the FTA's verification tool and states on the invoice that the reverse charge applies. Zero-rated exports and non-metal scrap are outside the rule. Without the declarations, the reverse charge does not apply: the supplier charges VAT at the standard rate and the buyer cannot recover it. When VAT registration is mandatory is explained separately.

Have VAT penalties changed?

Yes. Cabinet Decision No. 129 of 2025 amended the administrative penalties under the VAT, Excise Tax and Tax Procedures laws from 14 April 2026, reducing several and changing how others are calculated. Under the amended schedule:

  • late payment: a monthly penalty at 14% a year on the unpaid tax, from the day after the due date;
  • voluntary disclosure of an error: 1% of the tax difference per month or part month, from the day after the return was due until the disclosure;
  • no voluntary disclosure before the FTA notifies an audit: a fixed 15% of the tax difference plus 1% a month;
  • not providing records in Arabic when requested: AED 5,000, down from AED 20,000.

How to correct VAT return errors is covered separately.

How does e-invoicing fit in?

E-invoicing follows its own timetable under Ministerial Decision No. 244 of 2025, as amended, with a pilot and voluntary adoption from 1 July 2026. In-scope businesses with revenue of AED 50 million or more must appoint an accredited service provider by 30 October 2026 and go live by 1 January 2027; smaller businesses follow by 1 July 2027.

For VAT, once an electronic invoice is required or issued, the buyer must keep it in that format to recover the input tax. E-invoicing is covered in a separate article.

What should businesses do now?

Review the processes these changes touch, starting with two close deadlines: 30 October 2026 for in-scope businesses with revenue of AED 50 million or more to appoint an e-invoicing provider, and the end of the one-year transitional window, which opened on 1 January 2026, for older credit balances.

  1. List VAT credit balances by the tax period in which they arose; claim or use any nearing five years.
  2. Update import processes: self-invoices are no longer required for imports made from 1 January 2026; keep the supplier invoice and, for goods, the customs statement.
  3. Adopt a written supplier verification policy under FTA Decision No. 13 of 2026 and keep evidence of each check.
  4. Test VAT claimed on staff benefits since 1 October 2026 against FTA Decision No. 17 of 2026.
  5. Metal scrap traders: exchange the required declarations before each supply, verify TRNs and update invoice wording.
  6. Keep scanned and electronic records complete, legible and accessible (FTA Decision No. 4 of 2026, from 30 July 2026); see what the FTA asks for in a VAT review.

Getting help

For help applying these changes to your business, see our VAT and indirect taxation services or contact us.