From Self-Invoicing to Supplier Due Diligence: Navigating UAE’s 2025 VAT Law Amendments

• Elimination of Self-Invoicing under Reverse Charge
  Taxable persons are relieved from issuing self-invoices for reverse charge transactions (imports of goods and services). Instead, businesses only need to retain adequate supporting documentation per Executive Regulations. [mof.gov.ae], [linkedin.com], [ebs.ae]
• Five-Year Limit for Excess Recoverable Input Tax
  Excess input tax must now be claimed, offset, or refunded within five years from the end of the tax period in which it arose. After that, the entitlement expires. [mof.gov.ae], [kpmg.com], [alvarezandmarsal.com]
• New Anti-Evasion Provisions (Article 54 bis)
  Input tax deductions can be disallowed if:
• • The supply is part of a tax evasion chain, and the taxpayer knew or should have known, or
  • The taxpayer failed to verify the legitimacy of the supply, tying in enhanced supplier due diligence obligations. [cms.mmjs.co], [alvarezandmarsal.com], [amaaudit.com], [xb4.ae]

Federal Decree-Law No. 17 of 2025 – Tax Procedures Law Amendments

• Unified Five-Year Timeframe for Refunds & Credit Balances
  Refund requests or applications to offset credit balances (VAT, corporate, excise) must be made within five years from the end of the relevant tax period. Exceptions allow claims for credits arising after expiry or within the last 90 days. [mof.gov.ae], [rvguae.com], [uaeahead.com]
• Transitional Relief for Historic Balances
  Taxpayers with credit balances whose five-year expiry falls pre- or within one year of 1 January 2026 can still submit refund claims until 31 December 2026. Voluntary disclosures tied to those refunds must be made within two years after filing. [mof.gov.ae], [rvguae.com], [aaconsultancy.ae]
• Expanded Audit & Assessment Powers
  The FTA can extend audits and issue assessments beyond the standard five-year window if:
  • An audit began before expiry,
  • A refund or voluntary disclosure was submitted in the fifth year, or
  • Tax evasion or registration failures are suspected (up to 15 years). [rvguae.com], [mof.gov.ae], [ae.andersen.com]
• Binding FTA Guidance Requirement
  New Article 54 bis mandates the FTA to issue formal, binding guidance to promote consistent interpretation of tax legislation. [ae.andersen.com], [rvguae.com]

Impact on Businesses

These reforms bring substantial shifts in VAT recovery, refund structures, internal controls, and audit preparedness:

• VAT Recovery & Refund Rights
  Businesses must monitor the validity period of input tax credits carefully to avoid losing recoverable amounts after five years.
• Reverse Charge Compliance
  With self-invoicing removed, enterprises should simplify reverse-charge processes but maintain robust document retention and audit trails.
• Supplier Due Diligence and Documentation
  Firms must enhance verification procedures for suppliers and supplies to meet anti-evasion standards and support claims.
• Audit Readiness and Governance
  Prepare for FTA audits with rigorous documentation, particularly for refund/fifth-year claims and transactions prone to evasion scrutiny.
• Establishment of Binding Procedures
  Stay tuned for official FTA guidance to ensure consistent law application and reduce compliance uncertainty.

✅ Recommended Business Actions

• Identify and Claim Old VAT Credits
  Review VAT balances from 2018–2020 and submit eligible claims before expiry (by end 2026) to avoid forfeiture.
• Revise Internal Processes
  Eliminate self-invoicing procedures; update systems to retain required support documents for reverse-charge supplies.
• Enhance Supplier Verification
  Implement enhanced KYC/verification checks, obtain documentation, and maintain audit-readiness for all significant suppliers.
• Revise Governance Frameworks
  Update compliance policies, controls, and record-retention timelines to align with five-year limitation and enhanced FTA audit powers.