Common VAT filing mistakes and how to avoid them

UAE VAT has been in place since 2018, yet the same return errors keep appearing. Each one can lead to penalties or lost input tax. Here are the mistakes we correct most often, how to avoid them, and the changes that took effect in 2026.

1. Reporting a supply in the wrong tax period

VAT is due in the period of the date of supply, which is generally the earliest of delivery, issuing the tax invoice, or receiving payment. Advance payments and long-⁠running contracts are where this goes wrong most. Reconcile your sales ledger to invoices and receipts before every return.

2. Recovering input tax you are not entitled to

Input tax can only be recovered for business use, and only with a valid tax invoice or, for imports and reverse-⁠charge supplies, the customs declaration or other supporting documents. Some costs are blocked entirely, including client entertainment, motor vehicles available for personal use, and goods or services provided to employees for their personal benefit.

Since 1 January 2026, under Federal Decree-⁠Law No. 16 of 2025, the Federal Tax Authority (FTA) must deny input tax where you knew a supply was connected to tax evasion, and may deny it where you should have known. From 1 October 2026, FTA Decision No. 13 of 2026 sets out the checks you must carry out and document before you recover the tax. Verify each supplier’s identity or incorporation and its actual place of business, and check it for risk indicators, when you first deal with it and again whenever it has not been verified in the previous 12 months. Then check each supply: that it has a genuine commercial reason, that the price and payment terms make sense, and that it fits the supplier’s licensed activity. You may skip these checks for a supply under AED 10,000 excluding VAT, unless your purchases from that supplier exceeded AED 100,000 over the previous 12 months or are expected to exceed it over the next 12. Where your purchases from one supplier exceed AED 375,000 over the previous 12 months, or are expected to over the next 12, the decision adds further checks, including a bank confirmation of the supplier’s account and a review of its public reputation. A valid tax invoice on its own is no longer enough.

3. Forgetting the reverse charge

When you import services, or import goods through customs, you usually account for the VAT yourself under the reverse charge. Missing it understates your output tax, even if you can recover the same amount as input tax. Since 1 January 2026 you no longer issue a self-⁠invoice for reverse-⁠charge supplies, but you must keep the supporting documents.

4. Treating exempt supplies as zero-⁠rated

Both mean no VAT on the sale, but the effect on your costs is very different. Zero-⁠rated supplies, such as most exports, keep full input tax recovery. Exempt supplies, such as bare land, local passenger transport and many residential leases, do not, and may require you to apportion your input tax.

5. Allocating sales to the wrong emirate

Standard-⁠rated sales are reported by emirate on the return. Base the split on where your establishment is, not simply on where your customer is based.

6. Not repaying input tax on unpaid supplier invoices

If you recovered input tax but have not paid the supplier within six months of the agreed payment date, you must repay that input tax in the following return. You can reclaim it once you pay.

7. Correcting errors the wrong way

If an error changes your net tax by AED 10,000 or less, you can generally correct it in the next return. Above that, you must submit a voluntary disclosure within 20 business days of becoming aware of the error. Acting before the FTA contacts you keeps the penalty lower: under Cabinet Decision No. 129 of 2025, in force since 14 April 2026, it is 1% of the tax difference for each month if you disclose before the FTA notifies you of an audit, and a fixed 15% plus 1% per month after that notice.

8. Letting refundable VAT expire

Excess refundable VAT must now be used against VAT due, or claimed as a refund, within five years of the end of the tax period in which it arose, or the right to it lapses. If that five-⁠year period had already ended by 1 January 2026, or ends during 2026, you have until 31 December 2026 to claim the balance.

How to stay compliant

• Close your books monthly, even if you file quarterly.
• Reconcile the VAT control account to the return before submitting.
• Keep tax invoices, customs declarations, contracts and other VAT records for at least five years after the end of the tax period they relate to, and records relating to real estate for 15 years. If you are also subject to Corporate Tax, as most UAE companies are, keep them for at least seven years.
• Review your treatment whenever you start a new type of sale or supplier arrangement.
• Prepare for e-⁠invoicing: businesses with revenue of AED 50 million or more must appoint an accredited service provider by 30 October 2026 and go live on 1 January 2027; other businesses go live on 1 July 2027.