UAE: Adjustments following registrant's exit from VAT Group
New directive clarifies post-exit VAT adjustments for historical transactions.
The UAE Federal Tax Authority (FTA) issued Directive on Tax Transactions No. 2 of 2026, which becomes effective August 1, 2026, regarding adjustments to output tax and input tax following a registrant's exit from a UAE VAT Group.
The directive clarifies that when a person leaves a VAT Group but remains registered for VAT purposes, that person must account for VAT adjustments relating to taxable supplies or expenses incurred before leaving, provided they were previously declared in the VAT Group's returns. Adjustments include reductions in taxable supplies (such as credit notes) and reductions in taxable expenses when input VAT was previously recovered. Registrants must maintain supporting documentation to evidence that the adjustments relate to historical transactions of the former VAT Group.
Read a July 2026 report prepared by the KPMG member firm in the UAE