The UAE Ministry of Finance has implemented significant amendments to the Tax Procedures Law, effective January 1, 2026, aimed at creating a clearer and more efficient tax framework. These changes introduce new timelines for credit balance refunds, expand the Federal Tax Authority's audit powers, and provide greater flexibility for taxpayers managing their tax affairs.
Key Changes at a Glance
The amendments establish a five-year period for requesting refunds of credit balances from the Federal Tax Authority (FTA) or using those balances to settle tax liabilities. This creates certainty and prevents indefinite accumulation of old balances. Importantly, the law grants additional flexibility: if a credit balance arises after the five-year period or within the final 90 days of that period, taxpayers can still submit requests in specific cases.
The FTA now has broader power to conduct tax audits or issue assessments even after the limitation period expires—but only in certain circumstances, such as when refund requests are submitted in the final year of the limitation period. This balances taxpayer protection with the state's need to safeguard its financial interests.
Another significant change allows the FTA to issue official, binding directions to taxpayers regarding how tax laws apply to specific transactions. This reduces interpretation inconsistencies across different cases and lowers compliance risks.
Transitional Support for Existing Balances
Businesses with existing credit balances where the five-year period expired before January 1, 2026, or will expire within one year from that date, have a one-year grace period (until January 1, 2027) to submit refund requests. They can also file a voluntary disclosure related to that request within two years of filing—even if the FTA has not yet decided—ensuring fairness in handling legacy cases.
What this means
- Action required: If your company has credit balances, review the five-year timeline now. If your balance period expires soon, submit your refund request before the deadline to avoid losing the right to claim.
- Clearer planning: The explicit five-year rule and flexibility provisions give you certainty when budgeting and forecasting cash flow from tax refunds. No more ambiguity about when balances expire.
- Lower compliance risk: The FTA's new power to issue binding directions means tax treatment of similar transactions will be more consistent across businesses, reducing uncertainty and supporting better compliance planning.