UAE amends corporate and VAT rules to simplify operations – Firstpost

The UAE has introduced coordinated amendments focusing on the legislative changes covering the corporate tax, value added tax (VAT), and the Commercial companies law.  

These amendments are aimed to simplify operations, modernise the business environment and strengthen the country’s business friendly framework, aligning companies and providing them a clear guidance on taxation.  

Corporate tax amendments 

The corporate tax amendments clarify a detailed guidance on calculating and settling tax liabilities when credits, incentives, or reliefs apply.  

Liabilities will be settled in a specific order: first, withholding tax credits; then, foreign tax credits; followed by any other Cabinet approved incentives or reliefs.

The amendments are a part of a broader 2025 corporate tax overhaul that also brings the regime in line with OECD Pillar.  

Taxpayers are also allowed to claim payments for unused tax credits, provided they adhere to specified timelines and procedures.  

VAT law

On the VAT side, Federal Decree Law No. 16 of 2025, effective from January 1, 2026, simplifies tax procedures maintaining and getting in compliance with global standards.  

Among other measures, the reforms simplify procedures by removing the requirement for self-invoicing under the reverse charge mechanism (where supporting documentation exists) and introduce a five‑year time limit for recovering excess refundable VAT.​

These measures remove previous uncertainties and ensure consistent and transparent application of the corporate tax framework, which applies a standard 9 percent rate to companies with profits above Dh375,000 ($102,110), while profits below this threshold remain tax free.

Businesses will no longer need to issue self-invoices under the reverse charge mechanism if supporting documentation is kept.

Companies law

The amendment expands flexibility and competitiveness in the corporate structures. The law introduces the non-profit company, allowing organizations to reinvest net profits to achieve their objectives without distributing profits to shareholders.

It helps the users to solve complex problems, including the rights of voting , redemption, as outlined in a company’s articles of incorporation or bylaws.