What Is the UAE Five-Year Tax Credit Limit? Federal Decree-Law No. 17 of 2025

The UAE Ministry of Finance issued Federal Decree-Law No. 17 of 2025 (hereinafter referred to as “the amended law”), amending certain provisions of Federal Decree-Law No. 28 of 2022 on Tax Procedures (hereinafter, the “Tax Procedures Law”).

The amended law came into effect on January 1, 2026, and sets a period not exceeding five years from the end of the relevant tax period for requesting the refund of a credit balance from the Federal Tax Authority (FTA) or for using that balance to settle tax liabilities.

The amendments to the Tax Procedures Law are more substantial than the parallel changes to the VAT Law introduced under Federal Decree-Law No. 16 of 2025, and are expected to have a considerable impact on compliance requirements, administrative processes, and the overall interaction between taxpayers and the FTA.

The five-year limit: How it works

The amendments set a maximum period of five years from the end of the relevant tax period for a taxpayer to request a refund of a credit balance from the FTA or to use that balance to settle tax liabilities. Both the FTA and the taxpayer are now bound by this limit.

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If no request is made within that window, the credit can be forfeited under the new law. This applies across all federal tax types, including VAT, corporate tax, and excise tax. The amended law also allows for limited cases where a refund request may be submitted if the credit balance arises after the expiry of the five-year period or within the last 90 days of that period, subject to specific conditions.

Audit and assessment periods

The five-year limit also governs the FTA’s audit powers, but with important extensions.

The statute of limitations for tax audits and assessments was previously capped at five years. Under the new rules, this period can now be extended up to 15 years in specific circumstances, such as cases involving tax evasion or failure to register for tax purposes.

If a taxpayer is notified of an audit before the expiry of the standard period, the FTA has four additional years to complete it.

Transitional provisions: A one-time opportunity

If the five-year period for a credit balance already expired before 1 January 2026, or will expire within one year after that date, the taxpayer receives a fresh one-year window starting 1 January 2026 to submit a refund request. There is also a two-year window to file a voluntary disclosure correcting errors related to that claim, provided the FTA has not yet issued a decision. Kayrouz & Associates

Why this matters for UAE businesses

The amended law has introduced one of the most consequential changes to the UAE’s tax landscape since VAT was implemented in 2018, yet many businesses remain unaware that there is now an expiration date to claim VAT refunds.

The introduction of forfeiture for unused credit balances is expected to encourage more active reconciliation of tax positions, earlier submission of refund requests, and closer engagement with the Federal Tax Authority. Businesses may need to reassess document retention practices and internal compliance controls to ensure that their audit readiness aligns with the limitation window.

Businesses should act promptly on the following:

• Identify all outstanding VAT, corporate tax, and excise tax credit balances and calculate when the five-year window closes for each;
• Prioritize refund applications for credits from 2020 and 2021, where deadlines fall in 2025 and 2026;
• Use credit balances to offset current tax liabilities where a refund application is not feasible;
• Review document retention policies to ensure audit readiness across a potential 15-year exposure window;
• Submit any required voluntary disclosures before the transitional window closes on 31 December 2026; and
• Update internal compliance procedures to track credit balances and refund deadlines as a routine part of tax management.

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The stakes are highest for businesses that have been accumulating VAT input tax credits, companies with historic excise tax positions, and multinationals with complex inter-period balancing arrangements, where unmonitored credit balances may be approaching the expiry threshold without triggering internal alerts.

See also: VAT in the UAE

How Dezan Shira & Associates Can Help

Federal Decree-Law No. 17 of 2025 places firm deadlines on tax credit recovery and introduces expanded audit exposure across VAT, corporate tax, and excise tax. Businesses that have not audited their outstanding credit positions face the risk of permanent forfeiture.

Our tax advisory professionals can help you:

• Audit outstanding VAT, corporate tax, and excise tax credit balances against the five-year deadline;
• Prepare and submit refund applications before the transitional window closes;
• Assess voluntary disclosure obligations for errors affecting credit or refund positions;
• Review document retention and compliance controls for FTA audit readiness; and
• Support ongoing tax registration, filing, and procedural compliance under the updated framework.

Speak to our team about your UAE tax compliance and credit recovery needs.