Dubai Accountant's Business Frontline: "Key Updates: UAE Tax Reforms (Dec 2025 Announcement)"

In December 2025, the UAE Federal Tax Authority (FTA) announced several major tax reforms that will come into effect from 2026. This article explains the key points of the reforms and how to respond in practice.

① Amendment to the VAT Act (Amendment regarding reverse charge)
The handling of reverse charges under the VAT Act will be simplified. Previously, it was necessary to issue a self-invoice when purchasing imported goods and services, but this will no longer be necessary from January 1, 2026. In addition, the deadline for VAT refund claims has been unified to five years, meaning that unclaimed VAT will no longer be eligible for refund if the refund claim is not made within five years.

② Revision of the Corporation Tax Act
The deadline for tax audits under the FTA has been clarified to five years (however, this can be extended to 15 years if there is suspicion of serious tax evasion). Furthermore, it is important to note that the deadline for claiming corporate tax has also been unified to five years, and it is no longer possible to carry over tax payments indefinitely.

③ Administrative penalties
Cabinet Decision No. 129 of 2025 unified and reduced the penalty system overall. For example, late corporate tax returns previously incurred penalties on a monthly basis. Under the new system, penalties are now event-based, with a penalty of AED 500 for the first late payment and AED 2,000 for multiple late payments within 24 months. Meanwhile, interest on late payments has been unified from the previous complex multi-tiered structure (initial 2% + 4% + daily 1%) to 14% per year (1.17% simple interest per month). While the simplified calculation method makes it easier to understand, 14% per year remains a high level, so it is important to continue meeting filing deadlines.

Shingo Okamoto
CPA at the Japan Desk of Alwasiq Management Consultants. After working for five years at a major audit firm (EY), he became independent and established a tax firm in Minato-ku, Tokyo. He currently provides accounting and tax services to Japanese companies in Dubai.
shingo@alwasiq.net

Alwasiq Management consultants
An accounting firm based in Dubai's Business Bay, offering tax advisory services to over 100 Japanese companies through its Japan Desk.
https://alwasiq.net/jp/