Ahmed AbodaifPartner & Co-Founder
Key takeaways
- Self-invoicing is no longer required for reverse-charge supplies — but keep the supporting documents.
- Excess recoverable VAT must now be claimed within five years; older balances have a transitional deadline of 31 December 2026.
- The FTA can deny input VAT where a purchase was part of a tax-evasion chain you knew, or should have known, about.
- Since 14 April 2026, late payment of VAT is charged at 14% a year instead of the old escalating penalties.
The changes come from Federal Decree-Law No. 16 of 2025, which amended the VAT Law with effect from 1 January 2026, and Cabinet Decision No. 129 of 2025, which replaced the VAT and Excise Tax penalty framework from 14 April 2026.
1. No more self-invoicing on reverse charge
When you import goods or services for your business, you account for the VAT yourself under the reverse charge mechanism. Before 2026 you were expected to issue a tax invoice to yourself for these supplies. The amended law removes that requirement.
What to do: keep the documents that prove the supply and support your input VAT recovery — the supplier's invoice, the contract, and customs or import documents. Without them, recovering the VAT you declared is harder to defend.
2. A five-year limit on refunds of excess VAT
If your recoverable input VAT exceeds your output VAT, the excess is carried as a credit you can offset or ask the FTA to refund. The amended law now sets a five-year limit: once it passes, the excess can no longer be refunded or offset.
3. Input VAT and tax-evasion chains
The FTA can now deny input VAT recovery where the supply formed part of a tax-evasion arrangement and the business knew, or should have known, about it. In practice this makes supplier due diligence part of VAT compliance:
- verify new suppliers' TRNs and trade licences before you pay them;
- question prices that are far below the market or unusual payment routes;
- keep evidence that goods and services were actually received.
4. New penalty framework from 14 April 2026
Cabinet Decision No. 129 of 2025 replaced the earlier VAT and Excise Tax penalty decisions. The headline change is late payment: instead of the old structure of an immediate penalty followed by monthly increases, unpaid tax now attracts a penalty of 14% per year, calculated monthly on the outstanding amount. Several other penalties — such as those for some record-keeping and incorrect-return violations — were reduced. The penalty for late registration remains AED 10,000.
Your action checklist
- Review EmaraTax for excess VAT credits and file any refund requests before 31 December 2026.
- Update your import process so reverse-charge supplies are supported by complete documents.
- Add TRN and licence checks to supplier onboarding.
- Re-check how your accounting system books reverse-charge VAT and credit balances.
- Plan for e-invoicing, the next big change to invoicing — see our e-invoicing deadlines guide.
How Business Future CPA helps
We review VAT accounts and returns, recover refunds, run supplier due-diligence checks and correct past errors through voluntary disclosures. See our VAT services and internal control reviews.
Frequently asked questions
Do I still need to issue a self-invoice for imported services?
No. Since 1 January 2026 self-invoicing is no longer required for reverse-charge supplies. You should still keep the supplier invoice, contract and import documents to support your VAT recovery.
How long do I have to claim a VAT refund in the UAE?
Excess recoverable VAT is now subject to a five-year limit. Where that period had expired or expires within a year of 1 January 2026, the refund request must be filed by 31 December 2026.
What is the late payment penalty for VAT now?
Since 14 April 2026, unpaid VAT attracts a penalty of 14% per year, calculated monthly on the outstanding tax, under Cabinet Decision No. 129 of 2025.
Official sources: UAE Ministry of Finance · Federal Tax Authority (FTA)
This guide is general information based on UAE legislation and official announcements as at the date shown. It is not tax or legal advice for your specific situation — talk to us before you act.