UAE: Major UAE Tax Developments in Q4 2025 – Corporate Tax, VAT, Excise and E-Invoicing

Recent Federal Decree-Laws and Cabinet Decisions have introduced significant shifts in the UAE’s tax landscape, emphasizing stricter limitation periods, digital compliance, and refined excise structures.

1. Tax Procedures 

A new five-year limitation period now applies to requesting tax credit refunds or settling liabilities.

• Exceptions: Limited extensions apply if credits arise after the five-year mark or within its final 90 days.
• Federal Tax Authority (FTA) Powers: The Authority can now issue binding legal interpretations and conduct audits beyond standard periods if a refund is requested in the final year.
• Transitional Relief: Taxpayers whose five-year window expires before or shortly after January 1, 2026, receive a one-year grace period to submit refund requests.

2. VAT Amendments 

• Documentation: The obligation to issue "self-invoices" under the reverse charge mechanism is replaced by a requirement to maintain specific supporting documents.
• Input VAT Integrity: Taxpayers now have a positive obligation to verify the legitimacy of supplies. The FTA may deny deductions if a supply is linked to tax evasion.
• Refunds: A strict five-year limit is established for reclaiming excess VAT after reconciliation.

3. Corporate Tax: Investment Funds 

Specific timelines are set for foreign entities with a UAE nexus investing in REITs or Qualifying Investment Funds:

• Registration: Generally, within 12 months of the fund’s financial year-end.
• Filings: Annual exemption declarations must be filed within 10 months; deregistration must occur within three months of ceasing nexus.

4. E-Invoicing Penalties 

To enforce the electronic invoicing system, a new penalty regime applies:

• Non-Implementation: AED 5,000 monthly fine for failing to adopt the system or appoint an accredited provider.
• Transmission Failures: AED 100 per document (capped at AED 5,000/month) for late issuance.
• Reporting: AED 1,000 daily fine for failing to notify the FTA of system failures.

5. Excise Tax: Sweetened Drinks 

Effective January 1, 2026, the excise tax on sweetened drinks will be determined by sugar content per 100ml:

Exclusions include baby food, medical products, and drinks with ≥75% milk.

6. New Service Fees 

Starting January 1, 2026, the FTA will charge for Advance Pricing Agreements (APAs):

• Initial Request: AED 30,000.
• Renewal/Amendment: AED 15,000.

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Reference/Citation
1. Federal Decree-Law No. 17 of 2025

2. Federal Decree-Law No. 16 of 2025

3. FTA Decision No. 8 of 2025

4. FTA Decision No. 106 of 2025

5. FTA Decision No. 197 of 2025

6. FTA Decision No. 174 of 2025

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