The UAE Ministry of Finance has implemented sweeping amendments to the Tax Procedures Law, effective January 1, 2026, establishing clearer rules for tax refunds, credit claims, and audit procedures. These changes aim to enhance transparency, reduce administrative burdens, and strengthen the Federal Tax Authority's enforcement capabilities.
Key Changes
The most significant update introduces a five-year deadline for both taxpayers and the FTA. Taxpayers must now submit refund requests or utilize credit balances within five years from the end of the relevant tax period. Similarly, the FTA is limited to conducting audits and issuing assessments within this same five-year window, though specific exceptions allow the authority to act beyond this period in particular cases.
Error correction procedures have been simplified. Taxpayers no longer need to follow mandatory voluntary disclosure processes for all errors—only for cases specified by the FTA. Other errors can now be corrected directly through regular tax returns, eliminating unnecessary compliance friction.
Additional practical relief includes exempting businesses from self-issuing tax invoices when importing goods or services subject to reverse charge mechanisms, streamlining international trade compliance.
The law also tightens input tax deductions: these will be disallowed if the underlying supply is linked to tax evasion and the taxpayer was aware of this connection when claiming the deduction.
Transitional Provisions
Businesses with credit balances where the five-year period expired before January 1, 2026, or will expire within one year after that date, receive special relief. These taxpayers may submit refund requests within one year from January 1, 2026, with an extended two-year window for voluntary disclosure if the FTA has not decided on the claim.
What this means
- Act immediately on pending VAT refunds: Any unclaimed credit balances will face a hard five-year deadline. Review your position now and submit outstanding refund claims before time expires.
- Simplify your error management: You can now correct non-material errors directly through tax returns instead of complex voluntary disclosure processes—but verify which errors require mandatory disclosure with the FTA.
- Strengthen documentation practices: The FTA's expanded audit powers and new rules on tax-evasion-linked supplies mean rigorous supplier due diligence and transaction documentation are now essential compliance priorities.