UAE’s Updated VAT Refund Rules in 2026: A Guide for Businesses

Discover the UAE’s updated VAT refund rules effective January 1, 2026. Learn about the new five-year deadline for refund requests, transitional provisions, key exceptions, and what businesses must do to protect their VAT credit entitlements and ensure compliance.

The UAE Ministry of Finance has announced major updates to the VAT refund process, aimed at improving efficiency, transparency, and fairness within the country’s tax administration system. Issued on November 29, 2025, Federal Decree-Law No. 17 of 2025 amends several provisions of Federal Decree-Law No. 28 of 2022 on Tax Procedures, bringing important changes to how businesses and taxpayers may claim VAT refund amounts, including input tax credits and VAT overpayments from the Federal Tax Authority (FTA).

These changes will apply from January 1, 2026, and all VAT-registered businesses operating in the UAE should carefully assess their compliance and refund strategies accordingly.

Key amendments: Clearer timeframes and greater certainty

Five-year deadline for VAT refund requests

A central feature of the updated law is the introduction of a defined five-year deadline for submitting VAT refund requests.

• VAT-registered persons must now file refund claims within five (5) years from the end of the relevant tax period in which the credit balance arose.
• If the taxpayer fails to claim or apply the credit within that timeframe, the right to the refund expires.

This amendment provides much greater clarity on entitlement periods, helping businesses streamline internal tax controls and avoid losing legitimate refund amounts.

Flexibility for refunds in special cases

The law introduces specific exceptions to protect taxpayers’ rights: (a) if a new credit balance arises after the five-year period has ended or (b) if a refund request relates to a balance generated within the last 90 days of the five-year period – the taxpayer may still be permitted to file a refund request, subject to the conditions outlined in the Executive Regulations.

Extended FTA authority beyond the limitation period

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To maintain fairness and protect public revenue, the amendments also grant the FTA the authority to conduct tax audits and issue tax assessments after the expiry of the limitation period in certain circumstances – particularly if the refund request was submitted within the final year of the five-year limitation window.

This ensures both taxpayer protection and proper verification of refund claims.

Transitional rules and grace periods for existing credit balances

To support businesses during the shift to the new regime, the law provides transitional relief:

One-year transitional window (from January 1, 2026)

Taxpayers may still submit refund requests if:

• Their five-year limitation period expired before 1 January 2026; or
• Will expire within one year from that date.

These taxpayers are granted a one-year grace period, ending December 31, 2026, to submit outstanding refund claims.

Voluntary disclosure option

Where the FTA has not yet issued a decision on a refund request, taxpayers may:

• File a voluntary disclosure linked to that request
• Within two years from the date the refund claim was originally submitted

This provision gives taxpayers additional flexibility to correct or supplement earlier filings.

What UAE’s updated VAT refund rules mean for businesses

The revised framework significantly impacts how businesses should manage their VAT credit processes and historical tax positions.

1. Review historical VAT returns and unclaimed credits

Companies should immediately:

• Conduct a comprehensive review of their VAT filings
• Check for unclaimed VAT credits
• Identify balances nearing or affected by the new limitation deadlines

This is critical for preventing the loss of substantial refund entitlements.

2. Strengthen internal tax controls

The new refund timelines incentivize businesses to:

• Implement stronger VAT accounting processes,
• Track credit balances proactively, and
• Avoid delays in submitting refund requests.

3. Improve forecasting and financial planning

Clearer rules around refund eligibility:

• Reduce procedural uncertainty,
• Help businesses better manage cash flow, especially those carrying forward large VAT input credits, and
• Allow more accurate financial reporting and budgeting.

4. Prepare for potential tax audits

Since the FTA retains audit authority in specific post-limitation scenarios, businesses should:

• Maintain thorough transaction records,
• Ensure supporting documentation is accurate and accessible, and
• Strengthen compliance readiness for any future assessments.

Conclusion

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The UAE’s updated VAT refund rules mark an important step toward aligning tax processes with global best practices while improving predictability for businesses. With the introduction of fixed limitation periods, transitional provisions, and enhanced administrative clarity, companies now have a clearer roadmap for managing VAT credits and securing refunds. Businesses should take proactive action ahead of the January 1, 2026 implementation date.

This, especially reviewing historical credit balances and preparing structured refund strategies to ensure timely compliance and protect cash-flow positions.

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