UAE Tax Law Changes in 2025-2026: Key Updates and Implications for Your Business

UAE Tax Law Changes in 2025-2026: What Has Really Changed and What It Means for Your Business

Estimated reading time: 15 minutes

Key Takeaways

• The Tax Procedures Law (Federal Decree-Law No. 17 of 2025) institutes a 5-year window for refunds, credits and audits.
• Cabinet Decision No. 129 of 2025 lowers fines and adopts a 14% annualised late-payment model.
• VAT Law amendments (Federal Decree-Law No. 16 of 2025) simplify the reverse charge mechanism and align refund deadlines.
• The Domestic Minimum Top-Up Tax (Cabinet Decision No. 142 of 2024) enforces a 15% global minimum for in-scope multinationals.

Introduction: UAE Tax Law Changes and the New Phase of Regulation

The United Arab Emirates has entered a decisive new phase of tax regulation. Throughout 2025, the federal legislator implemented far-reaching UAE tax law changes that reshape tax administration, penalties and compliance across the federal tax system. These reforms follow the introduction of Corporate Tax in 2023 and transform a flexible, interpretative framework into a structured, time-bound system aligned with international standards.

As at 4 December 2025, the central pillars of these reforms are:

• Federal Decree-Law No. 17 of 2025 amending Federal Decree-Law No. 28 of 2022 on Tax Procedures.
• Cabinet Decision No. 129 of 2025 unifying penalties across Corporate Tax, VAT and Excise Tax.
• Federal Decree-Law No. 16 of 2025 amending the VAT Law, effective 1 January 2026.
• Cabinet Decision No. 142 of 2024 introducing the Domestic Minimum Top-Up Tax (DMTT) at 15%.

1. Federal Decree-Law No. 17 of 2025 on Tax Procedures: A New Architecture for UAE Tax Procedures Law

Federal Decree-Law No. 28 of 2022 on Tax Procedures is the core procedural code for all federal taxes. In 2025, Federal Decree-Law No. 17 of 2025 amended specific provisions to standardise limitation periods, streamline voluntary disclosures and clarify tax credit rules.

1.1 Five-Year Refund and Credit Window

The amended law creates a five-year period from the end of a tax period to claim refunds or apply overpaid amounts as credits. Tax teams must treat this as a hard deadline to reconcile and claim refundable positions for Corporate Tax, VAT and Excise Tax.

1.2 Transitional Flexibility

Transitional provisions preserve genuine historic claims nearing expiry and grant additional time in early 2026 for outstanding refund applications.

1.3 Limitation Periods for Audits and Assessments

A general 5-year limitation applies to audits and assessments, extendable to 15 years for evasion or fraud. This predictability aids in global risk matrices and document-retention policies.

1.4 Binding Administrative Guidance

The law recognises binding decisions, directions and clarifications issued by the Federal Tax Authority, reducing inconsistent treatment and improving legal certainty.

1.5 Common Code for All Federal Taxes

The amended Tax Procedures Law now serves as the unified procedural code for Corporate Tax, VAT and Excise Tax, covering time limits, audits, disclosures and penalties.

2. Cabinet Decision No. 129 of 2025: Unified Administrative Penalty Regime in UAE Tax Law

Effective 14 April 2026, Cabinet Decision No. 129 of 2025 replaces most penalty provisions of Decision No. 108 of 2021. The new regime harmonises the penalty framework for VAT and Excise Tax with the procedural logic of the Tax Procedures Law; Corporate Tax continues to follow the penalty table under Cabinet Decision No. 75 of 2023, albeit operating under the same procedural definitions.

2.1 Reduced Penalty Levels

• Failure to update records in Arabic: reduced from AED 20,000 to AED 5,000.
• Failure to notify changes: first breach AED 1,000; repeat AED 5,000.
• Incorrect tax return: fixed penalty of AED 500 for first violation; repeated violation carries a penalty of AED 2,000; the penalty may be waived if the return is corrected by the due date or a voluntary disclosure is submitted and there is no difference in the tax due.

2.2 Late Payment Penalties

Replaces the 2% + 4% model with a flat 14% per annum applied monthly on unpaid tax balances, aligning with OECD practice.

2.3 Shared Audit Facilitation Responsibility

Liability for failing to facilitate audits can now attach to the taxpayer, tax agent or legal representative, underscoring the need for clear engagement letters and internal protocols.

2.4 Alignment with Corporate Tax Penalties

The design mirrors the framework under Decision No. 75 of 2023, creating a consistent penalty logic across all federal taxes.

3. VAT Law Amendments Effective 1 January 2026: UAE VAT Law Changes and Administrative Simplification

On 3 December 2025, Federal Decree-Law No. 16 of 2025 amended the VAT Law to simplify procedures and align refund timelines.

3.1 Reverse Charge Simplification

In certain reverse-charge scenarios, taxable persons are no longer required to issue a self-invoice when importing goods or services for business use; instead, they must retain supplier invoices, contracts and other relevant documentation.

3.2 Five-Year Refund Claim Deadline

Under the amended Tax Procedures Law, taxpayers have up to five years from the end of the relevant tax period to request refund of a credit balance or to apply an overpayment against outstanding tax liabilities. After such period the right lapses.”

3.3 Anti-Avoidance Measures

The Federal Tax Authority can deny input VAT deductions linked to abusive schemes, heightening the need for supplier due diligence and robust documentation.

4. Domestic Minimum Top-Up Tax (DMTT) in UAE: Implementing the 15% Global Minimum

The UAE implemented OECD/G20 Pillar Two rules via Cabinet Decision No. 142 of 2024. The Domestic Minimum Top-Up Tax implements the 15 % global minimum tax under the OECD/G20 Pillar Two framework for in-scope multinational groups operating in the United Arab Emirates

4.1 Scope & Thresholds

Applies to groups with consolidated revenues of at least EUR 750 million in 2 of the prior 4 years and with UAE operations. Excludes purely domestic groups and certain non-profits.

4.2 Top-Up Calculations

Calculates jurisdictional effective tax rate on GloBE income and covered taxes; imposes a top-up to reach 15%. Calculations must be performed in the consolidated financial reporting currency of the multinational group, as required under the OECD/G20 GloBE framework.

5. Practical Impact of the 2025–2026 UAE Tax Law Changes

• Predictability: 5-year limits and harmonised penalties anchor compliance calendars.
• Historic Exposure: Transitional windows allow regularisation of old credits.
• VAT Simplification: Reverse charge relief and unified refund deadlines.
• Governance: Stronger documentation, anti-avoidance checks and integrated audit protocols.
• DMTT Integration: 15% minimum tax requires adjustments to transfer pricing and incentive planning.

6. Current Status as of 4 December 2025 and Immediate Action Points

Key measures in force or imminent:

• Tax Procedures Law: Amendments effective early 2026. Details
• VAT Law: Amendments effective 1 January 2026. Details
• Penalties: New framework from 14 April 2026.
• DMTT: In force for years from 1 January 2025.

Action Checklist:

1. Map historic credits vs. 5-year deadlines and prioritise refund claims.
2. Update compliance calendars for new limitation and penalty dates.
3. Reconfigure VAT reverse charge processes from 1 January 2026.
4. Review audit-facilitation responsibilities in engagement letters.
5. Integrate DMTT into global tax and transfer pricing models.
6. Embed tax controls within broader regulatory governance.

FAQ

Q: When do the new penalty rules take effect?

A: Cabinet Decision No. 129 of 2025 applies from 14 April 2026.

Q: How long do I have to claim VAT refunds?

A: You have 5 years from the end of the period in which excess input VAT arose.

Q: Who is subject to the DMTT?

A: Multinational groups with consolidated revenues of at least EUR 750 million and UAE operations for years starting 1 January 2025.

Q: Can historic Corporate Tax overpayments still be claimed?

A: Yes—use transitional provisions in early 2026 to submit refund applications for periods near the 5-year threshold.