Key takeaways
- VAT amendments under Federal Decree-Law No. 16 of 2025 apply from 1 January 2026.
- The 5% VAT rate and both registration thresholds stayed the same.
- Small Business Relief now runs to tax periods ending on or before 31 December 2029.
- The late corporate tax registration penalty is waived if the first return is filed within seven months of the first tax period's end.
- E-invoicing starts on 1 January 2027 for businesses with revenue of AED 50 million or more.
At a glance
| Change | In force | Who it affects |
|---|---|---|
| VAT amendments (Federal Decree-Law No. 16 of 2025) | 1 January 2026 | VAT-registered businesses |
| Small Business Relief extension | Tax periods ending by 31 December 2029 | Businesses with revenue of AED 3 million or less |
| Late registration penalty waiver | Announced 7 May 2025 | Companies that registered late or not at all |
| E-invoicing phase one | 1 January 2027 | Revenue of AED 50 million or more |
| E-invoicing phase two | Appoint a provider by 31 March 2027; go live 1 July 2027 | Revenue under AED 50 million |
VAT amendments from 1 January 2026
The Ministry of Finance lists three main changes under Federal Decree-Law No. 16 of 2025:
- No self-invoicing under reverse charge. Businesses no longer issue self-invoices when applying the reverse charge, but must keep the supporting documents the Executive Regulation specifies.
- Five years to claim a refund. Excess recoverable tax must be claimed within five years; after that, the right lapses.
- Input tax and evasion. The FTA can deny input tax where a supply is part of a tax evasion arrangement, so check your suppliers' legitimacy before you claim.
The 5% rate and the AED 375,000 mandatory and AED 187,500 voluntary thresholds didn't change. See VAT registration.
Small Business Relief extended
Ministerial Decision No. 131 of 2026 extended Small Business Relief to tax periods ending on or before 31 December 2029. It's for resident businesses with revenue of AED 3 million or less, and isn't available to Qualifying Free Zone Persons or members of large multinational groups. You still register and file, and claim the relief in each return.
Late registration penalty waiver
The FTA announced on 7 May 2025 that it would waive the late corporate tax registration penalty for anyone required to register who files their first return or annual declaration within seven months of the end of their first tax period. Penalties already paid by qualifying taxpayers are credited back to their FTA accounts. See how to register for corporate tax.
E-invoicing is coming
Under Ministerial Decision No. 244 of 2025, businesses with revenue of AED 50 million or more go live on 1 January 2027. Smaller businesses appoint an accredited service provider by 31 March 2027 and go live on 1 July 2027. An e-invoice is structured data exchanged between accredited providers, not a PDF. Our UAE e-invoicing timeline explains the steps.
What to do now
- Check your corporate tax registration and first return date.
- Stop issuing self-invoices for reverse charge, but keep the supporting documents.
- Review old VAT refund balances against the five-year limit.
- Plan your e-invoicing provider if your revenue is close to AED 50 million.
- Confirm whether Small Business Relief applies for each period.
We keep your company records and EmaraTax details current; your accountant or tax agent advises on tax positions. See FTA services.
Sources
- Ministry of Finance: VAT law amendments from January 2026
- Ministry of Finance: Small Business Relief extended to 31 December 2029
- FTA: waiver of the late corporate tax registration penalty
- Ministry of Finance: Ministerial Decision No. 244 of 2025 on e-invoicing
- Ministry of Finance: UAE eInvoicing programme
- Federal Tax Authority: registration for VAT
Official sources checked on 7 November 2026. This guide explains published rules in plain English and is not legal or tax advice. Rules change; we check the current position for your case before you act.