The UAE is beginning a new era of tax transparency and modernization. Major changes in the Tax Procedures Law and the VAT Law will enter into force as of January 1, 2026, aimed at enhancing the level of transparency and ease of compliance and increasing the enforcement capabilities of the Federal Tax Authority (FTA). These changes are in line with Federal Decree-Law No. 17 of 2025 and No. 16 of 2025, which will ensure that the Emirates will comply with the best practices in tax governance and instill confidence in companies involved in the operations of the Emirates.
What’s Changing?
1️. A Clear 5-Year Rule for Refunds and Corrections
The business will now run under a set five-year window:
For taxpayers:
- The period for refund requests or use of credit balances should be within 5 years of the tax period.
For the FTA:
- The authority may only work towards aligning credit balances to outstanding liabilities in the same period.
This eliminates past open-ended time constraints, which provides some predictability in historical tax jobs.
Extra flexibility for late refund claims
Businesses get more protection in special cases:
- In case there is a credit that comes in the last 90 days of the five-year window, another extension is allowed.
- On credits that expire before Jan 1, 2026, or during the first year of the transitional grace period until Jan 1, 2027, to file refunds.
Audit Extension Exception
In the case of a refund claim that is filed during the 5th year, the FTA can continue with the audit within two years of the claim date, whereas the conventional limit window is less than that.
2️. Simplified VAT Compliance
Businesses will benefit from reduced administration:
✔ Importation of goods/services to be used in business would not need any self-invoicing.
✔ Some mistakes in VAT could now be rectified through direct filing of tax returns.
✔ Reduced the use of voluntary disclosure procedures.
One tighter rule:
The deductions of the input tax are not admissible in case the supply was associated with the evasion of tax and the business was aware of it.
3️. FTA Empowered With Binding Guidance
The authority will now be able to issue official, binding interpretations of tax law.
What this means for businesses:
- Even the tax treatment of sectors.
- Quick resolution of complicated tax issues.
- Fewer disagreements and conflicting recommendations.
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New R&D Tax Credit—Driving UAE Innovation
The UAE is launching a refundable R&D tax incentive to stimulate its knowledge-based economy, with tax periods starting on or after January 1, 2026:
- Refundable—e.g., possible cash reimbursements
- 30-50 percent tax credit on qualifying R&D expenditure
- According to OECD Frascati Manual standards, to align worldwide innovation standards
This relocation is not only likely to bring in high-technology investment but also promote industrial and scientific growth throughout the country.
What Should Businesses Do Now?
Over the next year, companies should:
- Review outstanding refund claims nearing the five-year mark
- Update internal finance/tax systems for compliance changes
- Track eligibility for R&D tax benefits
- Strengthen due diligence in procurement to avoid denied VAT deductions
Looking Ahead: More Certainty, Less Complexity
The fact that the 2026 amendments in the UAE tax regime are a sign of a further transition to a transparent, fair, and globally sensitive tax regime is a clear indication.
✔ Predictable refund timelines
✔ Reduced administrative burden
✔ More innovation-driven tax benefits
Whether they are SMEs or not, all businesses will find it easier and more organized to operate in the tax environment; however, the FTA does not compromise the instruments to secure the revenue of the people.