UAE VAT Alert: Don’t Lose Your Refunds
UAE Ministry of Finance (MOF) issued Federal Decree-Law No. 16 of 2025, amending certain provisions of Federal Decree-Law No. 8 of 2017 (The ‘UAE VAT Law’). Simultaneously, the MOF also issued Federal Decree-Law No. 17 of 2025, revising specific parts of Federal Decree-Law No. 28 of 2022 (The ‘Tax Procedures Law’).
Both the updated UAE VAT Law and the amended Tax Procedures Law will come into effect from 1 January 2026, so significant changes are on their way, and taxpayers are required to respond appropriately to align their business operations and rhythm.
These changes will significantly influence compliance requirements, administrative procedures, and the overall coordination between taxpayers and the Federal Tax Authority (‘FTA’).
Starting 1 January 2026, UAE businesses will have 5 years from the end of the tax period in which the refund arises to claim VAT refunds.
Claiming Excess VAT Via Refund Application
Refund requests must be submitted within five years from the end of the tax period when the excess tax was paid, the credit balance resulted from a Tax Return, or Voluntary Disclosure submitted to the Authority, or otherwise from a decision issued by the Authority. If no request is made, the excess is carried forward for up to five years. Any unused or unclaimed amounts after this period will lapse permanently.
Exceptions & Deadlines:
A Taxpayer entitled to a refund of a Tax or credit balance, where five years have passed since the end of the Tax Period, may submit an application for a refund of this balance to the Authority, provided that the request is made within a period not exceeding one year from the effective date of this Decree-Law [1 January 2026].
This effectively means that businesses with outstanding refund balances now have until 31 December 2026 to claim any refunds for the tax years 2018-2020
During this one-year period, the taxpayer may also submit a Voluntary Disclosure regarding the refund, provided it is submitted within 2 years of the date of the refund application (unless the FTA has already issued a decision).
Caution:
Article 3(3) clarifies that the tax authority may conduct a tax audit or issue a tax assessment regarding a tax refund or credit balance application submitted to the tax authority, even if it falls outside the five-year limit, provided that the audit or assessment is completed within two years from the date of application submission.
Recommendation:
Businesses are advised to review all historical excess recoverable input tax balances parked in the Balance Sheet due to time constraints or a lack of documentation and guidance. Any unclaimed amounts should either be used to offset VAT liabilities or submitted for a refund within five years to avoid forfeiture. It is also important to note that if the excess recoverable input tax is not claimed or used to settle tax liabilities within five years, the right to claim will lapse. After this period, taxpayers will no longer be able to use the excess to offset VAT liabilities or request a refund.
How MBG Will Help You ?
- Identify eligible VAT credits and excess recoverable tax based on review of invoices, documents and contracts substantiating a transaction.
- Prepare and submit Refund Applications within/ outside the 5-year deadline.
- Review past VAT returns and payments to prevent penalties or rejected claims.
- Ensure compliance with FTA requirements regarding supplier verification and input tax credit claims.
- Maximise recovery and minimise risk, providing guidance on offsets against Payable Tax or penalties.
With MBG’s support, your business can protect VAT credits, claim refunds on time, and stay fully compliant under the new regulations.