Insight Advisory — insightadvisory.ae — 4 April 2026
Background
One of the most immediately consequential changes introduced by Federal Decree-Law No. 17 of 2025 (the amended Tax Procedures Law, effective 1 January 2026) is the introduction of a hard five-year deadline for claiming VAT, Corporate Tax, and Excise Tax refunds. Under the prior framework, businesses could carry forward unused input VAT credit balances and overpayments indefinitely. That flexibility has now been eliminated entirely. Once the five-year window closes from the end of a relevant tax period, the right to claim or apply that balance lapses — regardless of whether the underlying tax was correctly paid.
The Five-Year Deadline
Under the new rules, businesses have five years from the end of the relevant tax period to either request a refund of a credit balance or apply that balance to offset outstanding tax liabilities. After that point, the entitlement expires by operation of law. There is no discretion, no application for extension, and no redress for missing the window after the fact. UAE lawyer Ahmad Al Khalil has described this change succinctly: errors can no longer sit unresolved in accounting backlogs — if the window is missed, the money is gone even if the tax was paid correctly.
The Transitional Window for Historic Balances
The most pressing aspect of this change for many businesses is the transitional provision. Credit balances that arose before 1 January 2026 — and that would have been within the old open-ended regime — are subject to a dedicated one-year transitional window. Businesses have until 31 December 2026 to file refund requests for these historic balances. After that date, any unclaimed pre-2026 balance becomes permanently irrecoverable, regardless of when the underlying transaction occurred. Finance teams must treat this as an immediate priority item, not a year-end exercise.
Voluntary Disclosure in Connection with Refunds
The law introduces a specific voluntary disclosure provision linked to the transitional refund window. Taxpayers may submit a Voluntary Disclosure (VD) in respect of a refund application filed during the transitional period within two years of filing that application, provided the FTA has not yet issued a decision on the refund. This creates a limited secondary opportunity for businesses to correct errors in prior periods in connection with legitimate refund claims — but it is conditioned on the underlying refund application having been filed within the transitional window.
Applies Across All UAE Federal Taxes
The five-year refund deadline applies uniformly to Corporate Tax, VAT, and Excise Tax. Businesses that have been managing credit positions across multiple tax types — for example, VAT input tax credit pools and Corporate Tax prepayments — need to review each separately against the applicable tax period end dates and map which balances are approaching the five-year limit.
Why This Cannot Be Deferred
The UAE introduced VAT in January 2018. The first VAT tax periods therefore completed in early 2018. A five-year window from those periods would have started expiring in early 2023 under a strict reading — though the new law’s transitional provisions address this by providing the 2026 window. For Excise Tax, which was introduced in 2017, the risk profile is similarly significant. Finance teams that have not reviewed their older credit positions may be holding balances they assume are available but are in practice approaching forfeiture.
Particular Risk for SMEs
The risk is most acute for small and medium-sized businesses and entrepreneurs who may have accumulated input VAT credit balances over multiple years without proactively claiming refunds. Professional advisers have noted that many SMEs treat VAT credit balances as a residual accounting item rather than a time-sensitive asset. Under the new framework, that approach is no longer viable. The new rules effectively enforce a discipline of proactive credit management across the entire UAE taxpayer population.
Action Steps
Immediate audit of credit positions. Finance teams should run a full review of all VAT, Corporate Tax, and Excise Tax credit balances, organised by the tax period in which they arose. Prioritise pre-2026 balances. Any credit balance arising before 1 January 2026 must be the subject of a refund application filed before 31 December 2026. Calendar ongoing deadlines. Establish a rolling compliance calendar that tracks the five-year countdown from each new tax period close. Engage tax advisers. For businesses with complex credit positions — particularly those involving intra-group arrangements, zero-rated supplies, or international operations — professional tax review is strongly recommended before the transitional window closes.
Sources
- DLA Piper — UAE Tax Procedures Law Changes as per 1 January 2026
- The National — Ten New UAE Laws in 2026 That Everybody Should Know About
- The National — These Are the Tax Changes Coming Up in the UAE in 2026
- Middle East Briefing — UAE New Changes to Tax Procedures Law Effective January 2026
- UAE Ahead — UAE Tax Law Changes in 2025–2026: Key Updates and Implications
Book a free consultation
Get a clear view of the right setup, structure, and compliance steps for your case.