FTA has issued guidance on amendments to the Value Added Tax framework introduced by Federal Decree-Law No. 16 of 2024 and Federal Decree-Law No. 16 of 2025, covering e-invoicing, input tax recovery, the reverse charge mechanism and excess recoverable tax.
The UAE Federal Tax Authority (FTA) has issued VAT Public Clarification – VATP046, explaining amendments to Federal Decree-Law No. 8 of 2017 on Value Added Tax and its Executive Regulation.
The amendments were introduced through Federal Decree-Law No. 16 of 2024, effective 30 October 2024 and Federal Decree-Law No. 16 of 2025, effective 1 January 2026. The FTA said VATP046 should be read together with the relevant legislation and provides further analysis of how the amendments apply.
Amendments effective from 30 October 2024
The 2024 amendments clarified the Definition of Non-Resident under Article 1. Property ownership is not required for residency purposes. Instead, having a Place of Establishment or Fixed Establishment in the UAE determines whether a business is treated as a resident.
For example, where employees of a foreign business regularly work from a client’s UAE premises using company laptops or mobile devices, this may create a Fixed Establishment. The foreign business would therefore not be treated as a non-resident for VAT purposes.
The amendments also introduced definitions for Electronic Invoicing System, Electronic Invoice and Electronic Credit Note. An electronic invoice or credit note does not automatically qualify as a Tax Invoice or Tax Credit Note unless it satisfies the relevant requirements of Articles 59 and 60 of the Executive Regulation.
Under Article 55, taxable persons are required to retain Tax Invoices in electronic format where they are required or issued under the Electronic Invoicing System in order to deduct input tax. The Cabinet may also prescribe additional conditions for input tax recovery.
Businesses subject to the Electronic Invoicing System must issue and transmit Tax Invoices and Tax Credit Notes as electronic invoices or credit notes through the designated e-invoicing system under Articles 65 and 70.
The amendments further provide for Administrative Penalty Assessments where a person fails to issue a Tax Invoice, Tax Credit Note or required alternative document within the specified timeframe. Penalties for non-compliance with e-invoicing requirements will apply once those requirements are implemented. Businesses outside the scope of the e-invoicing system will continue to follow the standard VAT invoicing rules.
A new Article 54 bis allows the FTA to reject an input tax deduction where a supply or supply chain is connected with tax evasion. The provision applies where the taxable person knew or should have known, based on the circumstances of the supply, about the connection to tax evasion.
A business may be considered to have been required to know where it failed to verify the integrity and validity of the supply before deducting input tax. The provision applies across the supply chain, with verification measures set out in FTA Decision No. 13 of 2026.
Article 79 bis has also been repealed because statute of limitations provisions are already governed by Federal Decree-Law No. 28 of 2022 on Tax Procedures.
Amendments effective from 1 January 2026
Under the amended Article 48, taxable persons importing Concerned Goods or Concerned Services are no longer required to issue self-tax invoices under the Reverse Charge Mechanism.
Businesses must continue to account for VAT and retain the relevant supporting documents in accordance with the Executive Regulation. The change applies only to imports taking place on or after 1 January 2026. Earlier imports remain subject to the guidance in VATP044 for services and VATP045 for goods.
The amended Article 74 also introduced a five-year limit for dealing with excess recoverable tax. The FTA will offset excess recoverable tax against payable tax or outstanding administrative penalties.
Any remaining balance may be requested as a refund or carried forward. However, the taxable person has five years from the end of the tax period in which the credit arose to claim a refund or use the credit.
If the credit is not claimed or utilised within the five-year period, the right to a refund or offset will lapse.
