UAE VAT Changes Every Business Should Know

Why UAE VAT Changes Matter Now

UAE VAT changes are becoming a regular part of doing business in the country, and staying updated is no longer optional. The Federal Tax Authority (FTA) periodically issues updates that can affect how companies issue invoices, manage tax credit notes, or structure transactions. The major update in October 2024, effective from 15 November 2024, set new compliance expectations. With a few more updates already published in 2025, covering areas like input VAT apportionment and tax invoicing requirements, businesses are reminded that keeping pace with VAT rules is simply part of operating in the UAE.

For a broader understanding of how VAT affects businesses in the UAE, you can refer to our previous article, “UAE VAT: A Tax You Can’t Ignore”, which explains the basics, the scope of VAT, and why compliance matters for companies of all sizes.

Whether you’re a small business owner or managing a growing enterprise, understanding these updates helps avoid compliance risks and ensures smooth operations. Even if the changes seem technical at first, these UAE VAT changes ultimately affect day-to-day business activities like billing, reporting, and record-keeping.

In this article, we’ll break down the key UAE VAT changes in a simple, practical way and share tips on how to stay ahead.

Electronic Invoicing: Preparing for the New Era of VAT Compliance

Among the recent UAE VAT changes, businesses are also being impacted by the gradual rollout of the Electronic Invoicing System, or EIS. While EIS itself is a separate legislative initiative introduced last year, its implementation will directly influence how VAT rules apply to certain businesses. According to Ministerial Decisions 243 and 244 of 2025, EIS will be phased in starting July 1, 2026, and the VAT requirements for businesses under EIS will be enforced first on registrants required to implement electronic invoicing.

For these businesses, issuing Tax Invoices and Tax Credit Notes electronically becomes mandatory, which standardizes the invoicing process and ensures accurate reporting to the FTA. Some of the traditional VAT flexibilities, such as simplified invoices or exemptions, will no longer apply once a business falls under EIS. Tax Credit Notes issued electronically must also follow strict formats to maintain authenticity, integrity, and proper record-keeping.

Business owners who want to prepare early can benefit from practical guidance. WellTax recently published a helpful article, “E Invoicing in the UAE: Five Key Phases and Rules Every Business Must Know“, which breaks down the phased implementation and what is required at each stage. Early preparation ensures that when EIS comes into effect, your business processes, systems, and records are already aligned with FTA expectations.

In practice, understanding how UAE VAT changes intersect with the EIS rollout allows businesses to plan ahead. WellTax can support by reviewing invoicing workflows, advising on compliance readiness, and guiding companies on how to maintain accurate electronic records. By taking action now, businesses can stay ahead, reduce the risk of errors, and ensure smooth VAT compliance once the phased rollout begins.

Input VAT Apportionment – Simplifying VAT Recovery

Under the UAE VAT changes, businesses making both taxable and exempt supplies can now benefit from a simpler way to recover VAT. From 15 November 2024, the FTA allows eligible businesses to use a Specified Recovery Percentage (SRP) based on the previous year’s VAT recovery, instead of calculating it for every tax period.

To qualify, businesses must have been VAT-registered for at least 12 months and make both recoverable and non-recoverable supplies. Applications for an SRP must be submitted by the authorized signatory, a tax agent, or a legal representative. Once approved, the SRP is valid for four years, providing consistency and reducing administrative burden.

For business owners, this means less time crunch and fewer errors when claiming VAT. Proper planning and documentation can make the process smoother and help ensure compliance under the Executive Regulation.

Other Key VAT Updates – Practical Implications for Your Business

While E-Invoicing and Input VAT apportionment are the most recent updates in 2025, there are several other UAE VAT changes that remain crucial for businesses to understand. These updates may not impact day-to-day operations for every company but ignoring them could create compliance risks or missed opportunities for VAT recovery. Here’s a practical guide to the most important changes and what they mean for your business:

• Virtual Assets and Crypto – VAT treatment for digital currencies has been clarified. Transferring or converting cryptocurrencies is now officially VAT-exempt, meaning any prior VAT charged should be adjusted. However, crypto mining is taxable only if done as a service for others. For personal mining, no VAT applies.

• Export of Goods and Services – The rules for zero-rating exports have been simplified. Businesses can now use alternative documentation instead of the traditional “Exit Certificates.” However, the scope of zero-rated services has narrowed, especially for real estate, electronic, and telecommunication services, which may now attract VAT if considered supplied in the UAE.

• Deemed Supplies – Low-value deemed supplies benefit from the AED 2,000 VAT threshold. This amount has been part of the law, but recent guidance confirms it as a threshold rather than a strict condition. Only the portion of output tax exceeding AED 2,000 is subject to VAT, while the first AED 2,000 remains exempt, preserving relief for low-value transactions.

• Voluntary Registration – Companies applying voluntarily for VAT registration must demonstrate that they genuinely conduct business in the UAE and intend to recover input tax. In practice, this means that FTA officers now request supporting supplier invoices or other evidence when reviewing voluntary registration applications, ensuring that only active businesses can benefit from VAT recovery rights.

• Tax Groups – Members of a Tax Group who stop making taxable supplies must be removed from the group. The representative member is responsible for notifying the FTA and updating the group’s composition, keeping VAT reporting accurate.

• Purchase Price Definition – The definition of “purchase price” has been updated, particularly for goods bought from non-registrants. Certain associated costs like shipping or installation may now be included when calculating VAT on profit margins.

• Health Insurance for Employees – Input VAT on health insurance provided to employees and their dependents (spouse and up to three children under 18) is now recoverable across all Emirates. Previously, this was limited to Abu Dhabi.

• Manpower vs Visa Facilitation Services – VAT treatment differs between manpower supply and visa facilitation. Visa facilitation services are subject to strict conditions, while manpower supply is treated as a taxable service, ensuring clarity for businesses providing these services internally or externally.

• Imported Services and Reverse Charge – Businesses receiving imported services for use in the UAE generally need to issue a self-invoice under reverse charge rules. However, if the original supplier invoice is retained, the process can be simplified, reducing administrative work.

• Barter Transactions – VAT applies to barter deals, where goods or services are exchanged instead of cash. The recent UAE VAT update clarifies that each party must account for VAT based on the market value of what they receive, rather than the value of what they give. This clarification is applicable retrospectively, reinforcing the need for proper documentation even when no cash changes hands.

• Precious Metals and Stones – For high-value local B2B transactions involving precious metals or stones, the reverse charge mechanism applies from 26 February 2025. Under this mechanism, the recipient, not the supplier, accounts for VAT when the goods are intended for resale or manufacturing, helping streamline compliance and reduce VAT fraud in high-value transactions.

• Simplified Tax Invoices and Reverse Charge – For domestic reverse charge (RCM) transactions, simplified tax invoices are no longer permitted. Businesses must issue standard tax invoices in these cases to ensure proper compliance with VAT regulations.

• Tax Invoice Compliance – A recent Abu Dhabi Cassation Court ruling confirmed that businesses can hold non-compliant suppliers accountable for invalid invoices that block VAT refunds. Proper invoicing is now critical to protect cash flow and avoid disputes.

Why This Matters for Business Owners

Even if your company hasn’t yet felt the impact of the recent UAE VAT changes, these updates can influence your VAT reporting, cash flow, and overall risk exposure. From clarifications on input VAT apportionment and deemed supplies to updated rules on tax invoices and reverse charge mechanisms, staying on top of UAE VAT changes is essential.

At WellTax, we help businesses navigate these updates by implementing efficient VAT procedures, reviewing invoicing practices, and advising on proper record-keeping. Understanding and adapting to UAE VAT changes early allows business owners to optimize VAT recovery, prevent compliance issues, and focus on growth with confidence.

Practical Steps for Businesses

Understanding UAE VAT changes is only the first step; the real challenge is applying them correctly in your daily operations. Businesses should start by reviewing current VAT processes and identifying areas that could be affected by recent updates.

Here are a few practical steps to prepare:

• Update Record-Keeping Systems: Ensure that your accounting software can handle E-Invoicing requirements and track VAT on both taxable and exempt supplies.
• Review Tax Invoices and Credit Notes: Make sure your tax invoices comply with Articles 59 and 60 of the VAT Executive Regulation, especially when dealing with reverse charge mechanisms, imported services, or zero-rated supplies.
• Train Your Team: Employees responsible for finance, accounting, and procurement should be aware of the updated rules to avoid mistakes and potential penalties.
• Monitor VAT Recovery Opportunities: Input VAT apportionment updates allow some businesses to optimize VAT recovery. To make the most of these opportunities, businesses should regularly review their eligibility and ensure they have proper tax invoices and meet all input VAT recovery rules. This helps maximize refunds while reducing the risk of disputes or challenges from the FTA.
• Leverage Expert Support: Subtle guidance from professionals like WellTax can help you navigate complex updates, implement systems, and maintain compliance without disrupting business operations.

By taking these steps, businesses can reduce risk, improve VAT recovery, and stay ahead of evolving regulations.

Staying Ahead of UAE VAT Changes

UAE VAT changesare inevitable, and keeping up-to-date is critical for business owners who want to avoid penalties and make the most of VAT recovery opportunities. Regularly reviewing your VAT processes, leveraging technology, and consulting experts ensures your business stays compliant and efficient.

At WellTax, we support companies in navigating these UAE VAT changes, providing practical advice, training, and systems guidance to help businesses implement updates smoothly. By staying proactive, businesses can focus on growth while confidently managing their VAT obligations.