Federal Decree Law No.16 and 17 of 2025 issued on 1 October 2025 effective 1 January 2026 | Change in VAT Law and Tax Procedure
 

The Federal Tax Authority (FTA) has introduced amendments effective 1 January 2026 to the following

1. Tax Procedures Law [Federal Decree-Law (FDL) No. 28 of 2022, as amended by FDL No. 17 of 2025]; and
2. VAT Law [Federal Decree-Law No. 8 of 2017, as amended by FDL No. 16 of 2025].

These changes establish statutory timelines for refunds and credit utilization, refine Voluntary Disclosure obligations, and harmonize limitation rules, while clarifying reverse-charge compliance and strengthening anti-evasion safeguards for input tax. The following tables provide article-level comparisons with Nexdigm Remarks for practical guidance.

I. Federal Decree-Law No. 28 of 2022 (Tax Procedures) Amendments Effective 1 January 2026

Article	Earlier Provision	Amended Provision	Nexdigm Comments
9(3)	Authority may allocate overpayments or credit balances to settle Tax or amounts due; no explicit statutory time limit.	Allocation or utilization of overpayments/credit balances must occur within five (5) years from the end of the relevant Tax Period referred to in Article 38(2).	Introduces a statutory five-year limit for allocation/use of credits; align remittance instructions and credit ageing reports to the five-year horizon.
10(5)	Voluntary Disclosure (VD) required for any error or omission even where there is no difference in Due Tax.	Where there is no difference in Due Tax, correction must be made by Voluntary Disclosure in the cases specified by the Authority, or via a Tax Return in other cases; VD remains mandatory for underpaid tax or overstated refunds.	Clarifies VD scope; reduces burden for non-impact errors; update SOPs to route immaterial corrections via returns where permitted.
38	Refund framework without statutory deadline; rights not time barred.	Refund of credit balance must be requested within five (5) years from end of relevant Tax Period; exceptions: one-year (Authority decision/last 90 days) and ninety (90) days (other late cases); right lapses if deadlines are missed; transitional one-year relief applies.	Implement refund calendars; initiate legacy credits for filing/utilization; leverage transitional window during 2026.
46(4)	No specific rule for audits beyond limitation for late refund cases.	Authority may audit or issue assessments after five (5) years only for refund applications submitted in the fifth year or under Article 38 exceptions; completion required within two (2) years of refund request.	Maintain robust documentation for late refund filings; diarize two-year audit completion timeline.
46(6)	VD barred after five (5) years.	Exception permits VD relating to pending refund applications within two (2) years from refund request date unless Authority has issued a decision; transitional relief applies.	Align VD timing with refund workflows; diarize two-year VD window for refund-linked matters.
54 bis	Not present.	Authority may issue binding directions on application of tax laws to transactions; binding on both Authority and taxpayers.	Monitor and adopt binding directions to standardize positions and reduce interpretive disputes.

 

II. Federal Decree-Law No. 8 of 2017 (VAT)

Article	Earlier Provision	Amended Provision	Nexdigm Comments
48 - Reverse Charge	Registrant treated as making a taxable self-supply and responsible for accounting and obligations; no explicit exception for self-invoicing.	Confirms obligations with the exception of issuing a Tax Invoice to himself under reverse charge.	Removes self-invoicing requirement; ensure retention of import documents and supporting evidence per Executive Regulation.
74(3) - Excess Recoverable Input Tax	Excess recoverable tax could be carried forward without explicit limitation.	Excess may be carried forward for not exceeding five (5) years from end of the Tax Period; right lapses if not refunded or used within this period.	Institute rolling five-year calendar; prioritize legacy balances for refund/offset before lapse.
54 bis - Anti-evasion Input Tax	No VAT-specific denial standard for input tax linked to evasion.	Authorities may reject input tax if supply is part of a tax-evasion chain and taxpayers know or should have known; failure to verify integrity may constitute constructive knowledge.	Elevate supplier due diligence (TRN validation, licensing, substance checks); document compliance to mitigate denial risk.
79-bis - Statute of Limitation	VAT-specific limitation article allowed extended windows for audits and VDs.	Article repealed; limitation now governed under Tax Procedures Law.	Harmonizes limitation architecture; compute timelines under TPL for audits and refund-linked VDs.