UAE Businesses Alert 🚨 New Tax Refund Deadlines 2026 | Ghalib Consulting

🚨 UAE Businesses Alert: New Tax Refund Deadlines You Can’t Ignore

Introduction

Picture this: You’ve diligently paid your VAT, filed your returns on time, and built up a substantial credit balance over the years. You’re planning to claim it back when the timing is right. Then, out of nowhere, you’re told that right has expired. Permanently.

For many UAE businesses, this scenario is about to become a harsh reality.

UAE Businesses Alert – This isn’t just another regulatory update you can skim through and forget. The UAE has introduced fundamental changes to tax refund procedures through Federal Decree-Law No. 16 and 17 of 2025, effective from 1 January 2026 . These amendments fundamentally reshape how and when you can claim VAT refunds and utilize credit balances.

The headline? You now have a strict five-year window to claim refunds. Miss it, and the money is gone forever.

Let’s break down exactly what’s changing, why it matters for your business, and the concrete steps you need to take before the deadlines expire.

The 5-Year Rule: What’s Actually Changing?

Before these amendments, the UAE Tax Procedures Law didn’t have a clearly defined statutory limitation period for claiming refunds or utilizing credit balances . This ambiguity often led to disputes and uncertainty for businesses carrying forward credit balances from previous years.

That era is over.

Under the new amendments to Article 38 of the Tax Procedures Law, refund requests for credit balances must now be filed within five years from the end of the relevant tax period . This applies to:

• Credit balances arising from overpaid tax
• Credits from voluntary disclosure adjustments
• Refundable input tax amounts
• Any other credit balance in your FTA account

If you don’t submit your refund request within this five-year window, the right to refund will be permanently forfeited .

Key Change: Article 74(3) of the VAT Law has been amended to specify that excess input tax can only be carried forward or refunded within 5 years from the end of the tax period in which it was recorded .

Grace Period: A Second Chance (But It’s Expiring)

Recognizing that many businesses may have older credit balances predating this new law, the FTA has introduced a transitional relief provision.

Here’s what you need to know:

If your five-year period has already expired before 1 January 2026, or will expire within one year after this date, you have until 31 December 2026 to file your pending refund requests .

This grace period is not a suggestion – it’s a lifeline. Once 31 December 2026 passes, any older claims will be permanently barred.

Why This Matters for Your Business

1. Cash Flow Impact

Unclaimed VAT refunds represent real cash that could be reinvested in your business. Whether you’re in retail, construction, healthcare, or logistics, sitting on unclaimed credit balances is now actively working against you.

2. Compliance Risk Intensifies

The FTA’s powers have been strengthened. Under the amended Article 46(4) of the TPL, if you file a refund claim in the fifth year, the FTA gets an additional 2 years from the claim date to audit and assess that claim . This means your records must remain accessible and accurate for even longer periods.

3. Input Tax Recovery Under Scrutiny

New anti-evasion provisions added to Article 54 of the VAT Law mean input tax recovery may be denied if:

• The supply is part of an evasion chain
• The taxpayer knew or should have known about this chain
• The taxpayer failed to conduct appropriate verification on the validity and integrity of the supply 

Due diligence on suppliers and invoices is no longer optional – it’s legally required.

The Ripple Effect: Other Changes You Should Know

Voluntary Disclosure Simplification

Under amended Article 10(5) of the TPL, you’re no longer required to file voluntary disclosures for nil-impact or minor errors affecting tax returns . These can now be corrected directly through relevant tax returns.

However, material errors still require proper disclosure. The FTA will specify which cases require formal voluntary disclosures.

Statute of Limitation for FTA Audits

The default 5-year limitation period for the FTA to conduct tax audits or issue assessments has been retained. However, exceptions now exist – including the 2-year extension mentioned above for fifth-year refund claims .

Penalty Updates Coming in 2026

A consolidated penalty regime under Cabinet Decision No. 129 of 2025 will take effect from 14 April 2026 . Key changes include:

Practical Action Plan: What You Need to Do Now

Step 1: Audit Your Credit Balances (Immediately)

Request a statement from the FTA via the EmaraTax portal showing all credit balances in your account. Identify balances approaching the 5-year mark.

Step 2: Prioritize Older Claims

If you have credit balances from 2019, 2020, or early 2021, file these refund claims before 31 December 2026. Don’t wait until the last minute – processing times can be unpredictable.

Step 3: Strengthen Supplier Due Diligence

Implement verification procedures for all suppliers. Maintain records showing you’ve validated:

• Valid Tax Registration Numbers (TRNs)
• Authenticity of tax invoices
• Proof of payments

Step 4: Review Record-Keeping Practices

Ensure your financial records are accessible for at least 7 years from the end of the relevant tax period (5-year base + potential 2-year extension for audited claims).

Step 5: Consider Professional Support

The new regime introduces complexity. If your business has significant credit balances or operates across multiple sectors, engaging tax professionals can help identify claims you might otherwise miss.

Conclusion

The message from the UAE government is clear: tax compliance is becoming more structured, time-bound, and enforceable.

While these changes bring much-needed certainty and predictability to the tax system, they also demand greater vigilance from businesses. The days of carrying forward credit balances indefinitely are over.

UAE Businesses Alert – The five-year refund window isn’t a distant future concern. For credit balances from 2019 and early 2020, the clock has already started ticking. With the grace period ending 31 December 2026, the time to act is now.

Don’t let unclaimed refunds become permanent losses. Review your position, file your claims, and ensure your compliance framework is ready for the new era of UAE taxation.

Let Ghalib Consulting Help You Navigate These Changes

At Ghalib Consulting, we specialize in helping UAE and KSA businesses navigate complex tax regulations with confidence. Our services include:

• VAT Refund Review & Claims – Identify and file all eligible credit balances before deadlines expire
• Tax Compliance Health Checks – Assess your current position against new requirements
• Supplier Due Diligence Programs – Protect your input tax recovery rights
• Tax Health Checks for Businesses – Comprehensive review of your tax position before FTA audits

📞 Contact Ghalib Consulting today for a free initial consultation. Let’s ensure your tax refunds are secured and your compliance is future-proof.

Don’t wait until it’s too late – your unclaimed refunds won’t wait for you.

Frequently Asked Questions

Q: Does the 5-year rule apply to all taxes or just VAT?
A: The amendments apply across the Tax Procedures Law, covering VAT, Corporate Tax, and Excise Tax regimes .

Q: What if I have a credit balance from 2018?
A: Under the transitional provision, you have until 31 December 2026 to file your refund request .

Q: Can the FTA audit me after the 5-year period?
A: Yes, if you file a refund claim in the fifth year, the FTA gets an additional 2 years to audit that claim .

Q: What happens to unused credit balances after 5 years?
A: They are permanently forfeited. No offset or refund may be applied for after the deadline passes .