The UAE has updated its Tax Procedures Law effective January 1, 2026, introducing a clearer five-year window for tax refund claims and granting the Federal Tax Authority (FTA) expanded powers to issue binding interpretations of tax rules. These amendments represent a significant modernization of the UAE's tax administration framework.
Key Changes
The new law establishes a definitive five-year limitation period for both taxpayers and the FTA. Businesses must now claim refunds or apply credits for overpaid taxes within this window, while the FTA can only recover overpayments or settle taxpayer obligations within the same timeframe. The law does offer targeted flexibility for specific late claims—for example, when credits arise in the final 90 days of the period or when circumstances warrant exception.
A major structural reform is the FTA's new authority to issue official binding directions that clarify how specific tax provisions apply. These directions bind both taxpayers and the FTA itself, directly addressing longstanding complaints about inconsistent interpretation of tax rules across different scenarios.
The amendments also simplify VAT compliance procedures. The requirement to issue self-invoices for reverse charge transactions has been eliminated, reducing administrative burden. However, businesses must now track VAT credits carefully—they can be carried forward for only five years before expiring.
Another refinement concerns input tax deductions: the FTA can now deny VAT credits if a supply is part of a transaction chain linked to tax evasion and the taxpayer was aware of the connection when claiming the deduction. This tightens compliance obligations around transaction scrutiny.
These procedural amendments apply across all federal taxes: Corporate Tax, VAT, and Excise Tax.
What This Means
Plan refund claims carefully. The five-year window is now non-negotiable for most situations. If you have pending overpayment claims or credit balances, ensure they are filed and documented within this period to avoid losing legitimate entitlements.
Update your VAT and tax systems immediately. The elimination of self-invoicing for reverse charges and the five-year VAT credit carryforward window require changes to your accounting processes and credit tracking discipline. Missing the deadline could result in forfeited credits.
Strengthen supplier verification practices. With tighter rules linking evasion to deduction denial, conduct due diligence on transaction counterparties. Ensure all suppliers are legitimate and that your transaction chain is documented transparently—this protects your right to claim input tax.