How the UAE’s Latest VAT Amendments Strengthen Compliance and Reduce Tax Evasion

Let’s examine the major updates and their implications for businesses operating in the UAE.

 Strengthened VAT Registration and Deregistration Rules

One of the notable changes under the recent amendments is the refinement of the registration and deregistration process.

The FTA now emphasizes timely VAT registration for businesses exceeding the mandatory threshold of AED 375,000, as well as proper deregistration for those who no longer meet this threshold.

The amendments ensure:

• Clearer timelines for applying and responding to registration requests.
• Tighter scrutiny of voluntary registrations (for businesses above AED 187,500).
• The ability of the FTA to deregister entities that fail to comply or pose risks to the integrity of the VAT system.

This proactive monitoring discourages false or delayed registrations — one of the primary loopholes exploited for tax evasion.

Regulation of VAT Tax Groups

The decision also refines provisions related to VAT group registration, where related parties under common control can be treated as a single taxable entity.

While VAT grouping simplifies reporting and reduces administrative burdens, it can also be misused to conceal internal transactions.  The amendments address this by:

• Defining “related parties” in clearer economic, financial, and regulatory terms.
• Allowing the FTA to reject or dissolve tax groups that appear to reduce tax revenue or facilitate evasion.
• Holding all members jointly liable for the group’s VAT obligations.

For business conglomerates and holding structures, this means stronger due diligence and transparent documentation are now more critical than ever.

Revised Rules for Deemed and Composite Supplies

The amendments also update definitions of deemed supplies and composite supplies, ensuring accurate tax treatment of bundled goods or services.

For instance, when a single transaction involves multiple components —such as a software license plus support services — the law clarifies how VAT should be applied to each element.  This reduces ambiguity and helps prevent underreporting of taxable value.

By closing these interpretative gaps, the UAE ensures consistent tax collection and minimizes opportunities for manipulation.

Clearer Zero-Rating and Exemption Criteria

Zero-rating and exemption rules have been among the most misunderstood aspects of VAT law.  The new amendments offer more precise definitions for zero-rated supplies, particularly in export transactions, education, healthcare, and financial services.

For instance:

• Exports now require robust documentation — customs declarations, shipping certificates, and commercial evidence — to qualify for zero-rating.
• Educational and healthcare institutions must meet stricter licensing and service criteria to maintain zero-rated status.

This ensures that only genuinely eligible businesses can benefit from these reliefs while preventing false zero-rating claims used to evade tax.

Enhanced Oversight on Deregistration to Protect Tax Integrity

A major feature of the amendments is the introduction of “Tax Deregistration to Protect the Integrity of the Tax System”.  This provision allows the FTA to proactively deregister any business that no longer qualifies for VAT registration or whose continued registration could compromise the system’s integrity.  This measure strengthens the regulatory net against dormant entities or shell companies that might otherwise exploit VAT mechanisms for fraudulent gain.