Beginning January 1, 2026, the United Arab Emirates (UAE) will bring into effect some key changes to the tax rules that will directly impact businesses in the Middle-East country. The UAE operates under a federal taxation framework, according to which, a standard value added tax (VAT) at a rate of 5% is imposed on the supply of goods and services.

Now, the UAE Ministry of Finance has amended some provisions of its tax laws , which will be effective from January 1, 2026. Reports suggest that the majority of the changes are procedural and they impact how taxpayers manage VAT credits, refunds, error corrections and audit exposure.

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Key changes in tax rules:

  • The UAE, for the first time, has introduced a statutory deadline of five years to claim VAT refunds or using credit balances. Previously, the taxpayers could carry forward credit balances without any expiry. Now under the amended law, refund claims must be submitted within five years from the end of the tax period, else the refund will lapse.
  • Another change is that the new provisions provide greater flexibility in correcting errors that do not impact due tax. They state that Voluntary Disclosures (VDs) will no longer be mandatory for every error discovered in a tax return, reported Economic Times.
  • The timeline of five years which has been introduced for submitting refund applications for tax credit balances, comes with transitional relief. This means that the taxpayers have a one-year window from January 1, 2026 to claim refunds for credit balances that arose more than five years ago.
  • The general statute of limitation for tax audits remains five years, but the amended law now allows the FTA additional time in refund-related cases, the report added.
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Who is impacted?

The changes have been made in consumption-based tax, and they apply uniformly across all UAE VAT-registered persons, irrespective of citizenship, the Economic Times reported citing Nimish Goel, Leader Middle East, Dhruva Consultants.

Calling the changes a maturing tax system, the expert mentioned that it would provide flexibility and timelines, ensuring certainty. “For individual residents (including Indian expatriates), there is no change in the VAT rate or its application on day-to-day consumption. The amendments primarily impact VAT-registered entities, rather than individuals as consumers,” Nimish Goel told ET.