UAE makes key tax amendments from January 2026: Here’s how it matters

The new laws aim to simplify refund process, clarify limitation periods and strengthen the Federal Tax Authority's powers during audits and investigations.

The UAE has issued amendments to its Tax Procedures Law that is set to come into effect from January 1, 2026.

The new laws aim to simplify refund process, clarify limitation periods and strengthen the Federal Tax Authority's (FTA) powers during audits and investigations.

Here's what the new tax system includes:

Refund deadlines clarified

The updated law sets a five-year window from the end of relevant tax period to request a refund in case a business has paid more tax than it owes. This is the first time that the timeframe has been defined clearly to settle credit balances.

Further, the new law provides flexibility when in specific situations, taxpayers can still submit refund requests after the five-year period has run out, or within the final 90 days before it expires.

New audit rules

The new law allows the FTA to conduct an audit or issue a tax assessment even after the limitation period has ended, but only in defined circumstances.

New binding directions

FTA has also been empowered to issue binding directions. These directions apply both to taxpayers and to the FTA itself when interpreting how the tax laws apply to specific transactions. This is to solve long-standing issues where different cases are treated differently because the law can be read in more than one way.

With binding directions, businesses should see more consistency and less uncertainty when planning or documenting transactions.

Relief for older reforms

The amendment also includes special temporary rules to deal with older refund claims.

If a taxpayer’s five-year period to request a refund has already expired before January 1, 2026, or is due to expire within the year of the date, they get a new one-year window starting January 1, 2026 to file a refund request.

The new law applies to all UAE taxes, including the Corporate Tax under Federal Decree-Law, Value Added Tax that covers registration, tax returns, record-keeping, and auditing, and Excise Tax, including administration and collection.

How does the new law affect you?

Taxpayers are no longer required to issue a tax invoice to themselves while importing certain goods or services for business use, aiming to simplify compliance and administrative process for international trade.

Further, errors not covered by specified correction cases can now be fixed directly through the tax return. Taxpayers are no longer involved in complex voluntary disclosure procedures in many instances. This streamlines the correction process, saving time and effort.

The new law tightens one key area. Input tax deductions will be disallowed if the supply is part of a transaction chain linked to tax evasion and the taxpayer was aware of this connection when claiming the deduction. This ensures diligence and compliance integrity.

The Ministry of Finance is also implementing incentives under the Corporate Tax Law, with the Research and Development (R&D) Tax Incentive set to take effect for tax periods starting on or after January 1, 2026.

This provides financial benefit, offering 30 per cent to 50 per cent tax credit on eligible R&D costs. This credit will be refundable, meaning companies could potentially receive a direct cash payment for R&D expenses, depending on their revenue and employee count in the UAE.