UAE’s New Tax Procedures Law

On 1 January 2026, the United Arab Emirates formally implemented major amendments to its Tax Procedures Law (Federal Decree‑Law No. 17 of 2025) and the VAT Law (Federal Decree‑Law No. 16 of 2025). 

These reforms alter key aspects of how taxes are administered, moving the UAE’s procedural framework closer to international standards while strengthening compliance certainty for taxpayers. 

Central to the reforms is the introduction of a five‑year statutory limitation period for claiming VAT refunds and credit balances, a first for the UAE, alongside amplified audit powers for the Federal Tax Authority (FTA), extended assessment windows, and clarified procedural rights and obligations for businesses. 

Historically, UAE businesses could hold excess input VAT credits indefinitely, carrying forward balances until they chose to claim refunds or offset future liabilities. Under the revised law:

Taxpayers must submit refund requests or utilise excess credit balances within five years of the end of the relevant tax period. After this deadline, credits expire and cannot be claimed.

A transitional relief period applies to legacy credits that would otherwise expire at the start of 2026: taxpayers have until 31 December 2026 to claim credits already older than five years. 

This deadline applies not only to VAT but also to credit balances arising under corporate tax and excise tax when applicable. It requires systematic internal tracking of tax credit ledger balances by period. 

The amendments significantly expand the FTA’s procedural authority:

The standard audit limitation period remains five years, but in specific risk scenarios — particularly suspected fraud or evasion — the FTA can conduct audits or issue assessments up to 15 years after the end of the relevant tax period.

The authority to issue binding tax interpretations and directives means consistent application of law across taxpayers and FTA officers, reducing interpretive uncertainty.

Refund claims submitted within the five‑year window can trigger extended audit exposure for prior years, effectively reopening historical periods. 

Combined, these changes elevate the importance of robust documentation routines and proactive tax governance.

Parallel amendments to the VAT Law empower the FTA to deny input VAT recovery where the supply chain involves transactions tied to tax evasion anywhere in the chain, placing greater onus on taxpayers to perform supplier due diligence ahead of claiming recoveries. 

From a technical planning perspective, several implications emerge:

• Cash‑flow and working capital: The five‑year refund deadline transforms input VAT credits from an indefinite asset into a time‑constrained one. Companies must now forecast refund windows as part of working capital planning.
• Compliance systems: Entities with long‑standing credit balances from capital‑intensive activities (e.g., real estate or export‑oriented sectors) must prioritise older periods before they expire.
• Audit readiness: With extended audit reach, maintaining contemporaneous records for at least the last 15 years in high‑risk scenarios becomes essential.

The UAE’s 2026 tax procedural amendments are not superficial paperwork changes. Instead, they reshape tax administration by introducing hard deadlines and enforcement mechanisms familiar in mature tax systems. 

While the corporate tax rate remains unchanged, the procedural environment now demands far greater rigour.

For many companies, proactive tax governance will be the difference between a smooth compliance experience and costly retroactive disputes. Early engagement with the new rules will unlock certainty and minimise unexpected financial impact.

Carry out a VAT credit ageing analysis immediately, prioritise refund or offset claims approaching the five‑year limit, and strengthen supplier due‑diligence processes to support future input VAT recoveries.

Do get in touch if you have any queries about this article or any tax matters in the UK or UAE.