FTA Clarifies VAT Adjustments Following Exit from a VAT Group

• The UAE Federal Tax Authority issued Directive on Tax Transactions No. 2 of 2026 (issued 8/10 July 2026, effective 1 August 2026), clarifying output/input tax adjustments where a registrant exits a VAT group but remains VAT-registered on a standalone basis. Post-exit adjustments to pre-exit supplies/expenses must be reported in the former member’s own return. [alvarezandmarsal.com], [tax.gov.ae]
• Covered adjustments include reductions in the value of taxable supplies previously declared through the VAT group’s returns, and reductions in taxable expenses for which input tax was previously recovered via the group. This applies even though the original supply or expense was reported in the VAT group’s return, not the individual member’s. [alvarezandmarsal.com]
• Practical triggers include post-exit credit notes (rebates, discounts, bad debt relief) and input tax corrections. The Directive does not appear to cover errors needing voluntary disclosures, and group members remain jointly and severally liable for the grouped period. Former members must retain documentation evidencing the link to previously declared amounts. [alvarezandmarsal.com]

Sources: Alvarez & Marsal · FTA Legislation – VAT