Insight Advisory — insightadvisory.ae — 30 March 2026
Background
Federal Decree-Law No. 17 of 2025, amending the UAE Tax Procedures Law (Federal Decree-Law No. 28 of 2022), came into force on 1 January 2026. The amendments cover every UAE federal tax — Corporate Tax, VAT, and Excise Tax — and represent the most significant overhaul of UAE tax administration procedures since the introduction of VAT in 2018. They are designed to strengthen enforcement, increase legal certainty, and bring the UAE’s procedural tax framework into line with international standards.
Extended Audit and Assessment Period
Under the previous rules, the statute of limitations for tax audits and assessments was generally capped at five years, giving businesses a clear and limited window of exposure. Under the new law, this period can now be extended to up to 15 years in specific circumstances — principally where tax evasion is suspected or where a taxpayer has failed to register for tax. This change gives the Federal Tax Authority (FTA) significantly more reach in complex or high-risk cases and is intended to discourage deliberate non-disclosure. For businesses with complicated intra-group structures or historical compliance gaps, this extension represents a materially higher risk profile.
Five-Year Refund Deadline
A strict five-year deadline has been introduced for requesting refunds of credit balances — including overpaid Corporate Tax, VAT, and Excise Tax. Under the previous framework, businesses could carry forward unused credit balances indefinitely. That flexibility has now been eliminated. Once the five-year window expires, the right to recover those amounts lapses entirely, even if the underlying tax was correctly paid.
Transitional provisions apply for credit balances that arose before 1 January 2026. Businesses with historic credit positions have been granted a new one-year window — running through to 31 December 2026 — to file refund requests for amounts that might otherwise have been at risk. This is an immediate priority for finance teams.
Binding FTA Directions
The FTA is now empowered to issue binding directions on how the Tax Procedures Law and other federal tax laws should be applied to specific transactions. These directions are binding on both the FTA and taxpayers, ensuring consistent interpretation and application of tax rules across all sectors. This reduces the scope for conflicting treatment between businesses operating in similar circumstances and should improve overall legal certainty.
Updated Penalty Regime
Cabinet Decision No. 129 of 2025, effective 14 April 2026, replaces most penalty provisions in the prior VAT and Excise Tax penalty framework. Key changes include a reduction in the penalty for failing to update records in Arabic from AED 20,000 to AED 5,000; a flat penalty of AED 500 for a first incorrect tax return (rising to AED 2,000 on repeat); and a replacement of the old 2% + 4% model for unpaid tax with a flat 14% per annum applied monthly — aligning with OECD practice. Corporate Tax continues to follow its own penalty table under Cabinet Decision No. 75 of 2023.
Universal Application Across All UAE Taxes
The amended Tax Procedures Law operates as the unified procedural code for Corporate Tax, VAT, and Excise Tax. Changes to time limits, audit procedures, voluntary disclosures, and penalty calculations now apply consistently across all three regimes. This simplification reduces the risk of companies inadvertently following outdated procedures for a particular tax type.
What Businesses Should Do Now
Audit historic credit balances. Finance teams should immediately identify any VAT, Corporate Tax, or Excise Tax credit balances or overpayments that may be approaching or already within the five-year window and prepare refund claims before 31 December 2026 where eligible.
Review tax position documentation. The 15-year audit window for evasion cases underlines the importance of robust documentation for all tax positions, particularly complex intra-group arrangements, transfer pricing, and historic registration decisions.
Monitor the new penalty regime. With Cabinet Decision No. 129 effective from 14 April 2026, businesses should update their compliance calendars and internal procedures to reflect the revised penalty structure for VAT and Excise Tax.
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