UAE Announces Major Changes to Tax Procedures Law Effective January 2026

The UAE has introduced major changes to its Tax Procedures Law, effective January 2026, through Federal Decree-Law No. 17 of 2025, to provide clearer refund timelines, stronger audit powers, and binding tax interpretations.

New tax rules in the UAE from 2026

The United Arab Emirates has introduced a significant round of amendments to its tax administration framework, issuing Federal Decree-Law No. (17) of 2025, which modifies key provisions of the Tax Procedures Law (Federal Decree-Law No. 28 of 2022). The new rules, effective January 1, 2026, redefine how refunds, audits, assessments, and taxpayer rights are handled across the country’s federal tax system.

Announced by the UAE Ministry of Finance, the reform package is positioned as part of the country’s long-term agenda to strengthen financial discipline, enhance clarity for businesses, and align local tax governance with global best practices.

Clearer refund deadlines to improve financial certainty

A key highlight of the amendments is the introduction of a fixed five-year deadline for requesting the refund of a credit balance or using it to offset outstanding tax liabilities. This applies across all federal taxes, including Corporate Tax, Value Added Tax (VAT), and Excise Tax.

For the first time, taxpayers have a legally defined timeframe for making refund claims, reducing ambiguity that previously complicated financial and tax planning.

The law also provides targeted flexibility. Refund claims may still be submitted after the standard five-year window in specific scenarios, such as when the claim arises late or when it relates to balances generated within the final 90 days of the limitation period. The aim is to prevent legitimate claims from lapsing due to timing constraints.

Expanded audit powers in limited circumstances

The amendments broaden the Federal Tax Authority’s (FTA) ability to conduct audits or issue assessments after the limitation period has ended – but only in clearly defined cases.

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One such case is when a taxpayer files a refund request in the final year of the limitation period. This allows the FTA to verify the accuracy of claims submitted close to the deadline, helping safeguard public revenue while ensuring predictability for businesses in normal circumstances. This balancing act reflects the dual intent of the reforms: protecting taxpayer rights while ensuring the government retains the authority needed to maintain the integrity of the tax system.

Binding directions to ensure consistent interpretation

A major structural change is the FTA’s new authority to issue official, binding directions clarifying how specific tax provisions should be applied.

These directions will be binding on:

• Taxpayers, who will be required to follow them; and
• The FTA itself, ensuring internal consistency in decision-making.

This measure directly addresses long-standing concerns among businesses about divergent interpretations of tax rules and reduces compliance uncertainty. By standardizing how tax legislation is applied, the UAE aims to create a more predictable environment for investors and multinational companies.

Transitional rules for older refund claims

The amendments also introduce temporary relief provisions for taxpayers whose refund timelines may have expired before the new law takes effect:

• If a taxpayer’s five-year refund period has already expired before January 1, 2026; or
• If it is set to expire within one year after that date;

they will be granted a new one-year window – starting January 1, 2026 – to file refund requests.

Additionally, taxpayers may submit a Voluntary Disclosure within two years of filing such a refund request if the FTA has not yet issued a decision, giving businesses added flexibility to correct prior errors.

Wide applicability across all federal taxes

Because the Tax Procedures Law governs the administrative framework for all UAE federal taxes, the amendments apply broadly. They affect procedures for:

• Corporate Tax under Federal Decree-Law No. 47 of 2022
• VAT, covering registration, filing, record-keeping, and refund rules
• Excise Tax, including assessments and collection procedures

This universal applicability means companies of all sizes and sectors will feel the impact of the revised timelines and compliance requirements.

Strengthening compliance and supporting economic growth

In its announcement, the Ministry of Finance emphasized that the reforms aim to modernize the tax ecosystem and encourage stronger business confidence. By clarifying taxpayers’ rights and obligations – particularly around refunds, audits, and dispute mechanisms – the UAE seeks to:

• Reduce administrative burdens
• Enhance transparency and predictability
• Improve the efficiency of tax administration
• Support sustainable government revenues
• Reinforce the UAE’s competitiveness as a global business hub

The changes form part of the broader fiscal modernization push following the introduction of Corporate Tax in 2023 and the establishment of a more robust tax administration system.

Summary

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In summary, the amendments deliver several meaningful benefits for UAE taxpayers: a predictable five-year window for refund claims, clearer audit boundaries supported by safeguards, and more consistent tax interpretations through binding directions issued by the FTA. Businesses also gain relief mechanisms for older or borderline refund cases, reducing the risk of losing legitimate entitlements due to procedural timing.

Collectively, these reforms create a simpler, fairer, and more transparent tax environment – reinforcing the UAE’s broader objective of strengthening economic resilience and maintaining its position as an attractive, reliable destination for global investment.

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