Introduction
The UAE has implemented comprehensive amendments to its Value Added Tax (VAT) law effective 1 January 2026, representing a major evolution in the country’s indirect tax framework. These changes aim to enhance compliance efficiency, close revenue leakage, and align the UAE VAT regime with global best practices.
For businesses operating in the UAE, these updates have direct implications on VAT recovery, documentation, audits, and system readiness.
For businesses operating in the UAE, these amendments are not merely technical updates, they directly affect VAT reporting, refund eligibility, documentation, and audit readiness.
Key VAT Law Changes in 2026
1. Simplification of VAT Compliance
The revised VAT law introduces clearer definitions and procedural simplifications around:
- Input tax recovery
- VAT documentation requirements
- Time limits for corrections and adjustments
This reduces ambiguity but also increases expectations of accuracy in VAT filings.
2. Five-Year Deadline for VAT Refunds
A major update is the introduction of a five-year statutory deadline for submitting VAT refund claims and credit adjustments.
Impact:
- Businesses with historic unclaimed VAT must act quickly
- Legacy VAT balances should be reviewed immediately
- Delayed claims beyond five years may be permanently lost
3. Reverse Charge Mechanism on Scrap Metal
A reverse charge VAT mechanism has been introduced for scrap metal transactions, shifting VAT liability from sellers to buyers.
Affected sectors include:
- Manufacturing
- Construction
- Recycling and metal trading
This change is intended to curb VAT leakage and fraud.
What Businesses Should Do Now
✔ Conduct a VAT health check
✔ Review historical VAT credits
✔ Update ERP and accounting systems
✔ Train finance teams on revised VAT rules
How Prabix Helps
Prabix supports businesses with:
- VAT impact assessments
- Refund and credit recovery reviews
- System readiness and process redesign
- Ongoing VAT compliance advisory