UAE Introduces Business-Friendly VAT Amendments to Support Compliance

The Federal Tax Authority (FTA) has rolled out key amendments to the VAT regime designed to improve clarity, reduce administrative burdens and enable smoother business operations across sectors. 

Key Highlights

  • A revised penalty framework under Cabinet Decision No. 129 of 2025 will come into effect in April 2026, lowering fixed penalties for VAT and other tax law violations and aligning them across tax types (VAT, excise, corporate tax).

  • Clarifications in the VAT Executive Regulation emphasise improved rules for registration/deregistration, profit-margin taxation, zero-rating of exports, input-tax apportionment and documentation standards. 

  • The Ministry of Finance states that VAT remains at a 5 % standard rate and continues to support the UAE’s fiscal diversification objectives, while businesses are reminded of their record-keeping, registration thresholds and compliance obligations. 

Business Implications

For companies operating in the UAE (particularly those offering cross-border services, mixed taxable/exempt supplies, or dealing with exempt sectors), the updated VAT rules mean:

  • Reduced risk of disproportionate penalties for inadvertent errors or late filings

  • Lesser admin burden through clarified rules on input VAT recovery, especially for businesses making both taxable and exempt supplies

  • A need to review invoicing, reverse-charge workflows, and registration/deregistration triggers to align with the updated definitions and documentation standards

Final Note

These amendments reflect the UAE’s ambition to maintain a business-friendly environment while strengthening the tax base. Companies that proactively review their VAT-compliance frameworks, train staff and update systems will gain a competitive edge in managing risk and improving cash-flow certa

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