A refund you expected as near certain cash can now be paused the moment you come under a tax audit. That is the practical effect of FTA Decision No. 9 of 2025. A credit balance that once looked procedural, cleared arithmetic, return filed, money due back, is no longer automatic while the Federal Tax Authority examines you.
This matters for every UAE business that carries refund positions across VAT, Excise Tax, or Corporate Tax. Exporters, regular VAT-repayment businesses, and groups sitting on credit balances all need to treat those refunds as contingent during an audit, not as guaranteed working capital.
This guide explains the Decision in plain terms and shows you how to reduce the risk. Here is what you will learn:
- What FTA Decision No. 9 of 2025 says, and when it took effect
- The six conditions that let the FTA withhold a refund
- How the rule interacts with an audit across all three federal taxes
- Practical steps to protect cash flow and stay audit ready
What Is FTA Decision No. 9 of 2025?
FTA Decision No. 9 of 2025 sets out the conditions under which the Federal Tax Authority may decline to refund residual tax amounts to a person who is under a tax audit. It was issued on 4 December 2025 and takes effect from 1 January 2026. It applies across VAT, Excise Tax, and Corporate Tax.
The Decision does not invent the audit power itself. It sits under the wider Tax Procedures Law framework that governs how the FTA administers all federal taxes, and it operates alongside the Corporate Tax regime. You can see the full set of instruments on the FTA legislation page, which lists the decrees, Cabinet decisions, and FTA decisions that make up the current framework.
What the Decision adds is clarity. It publishes a defined list of circumstances in which a residual balance can be held back during an audit. That means the Authority and the taxpayer work from the same set of triggers, rather than case-by-case discretion.
Distinguishing law, decision, and interpretation
It helps to separate the layers here, because they carry different weight.
- Binding primary law is the decree-level legislation, such as the Corporate Tax Law and the Tax Procedures Law, which establishes the FTA's powers and taxpayers' obligations.
- Decision-level administration is where FTA Decision No. 9 of 2025 sits. It implements and structures how a power is exercised, in this case the handling of refunds during audit.
- Official guidance is the explanatory material the FTA and the Ministry of Finance publish to help taxpayers apply the rules.
- Practical interpretation is professional analysis, including this article, which explains likely application but does not replace the legal text or advice on your specific facts.
Keeping these layers distinct is what stops a reasonable reading from hardening into an overstated certainty. Much of how this Decision plays out will depend on the facts of a given audit.
What Is a Residual Tax Amount or Refund Position?
A residual amount is the credit balance a taxpayer would otherwise receive back. In a VAT context, it is the net repayment position that arises when input tax exceeds output tax for a period. In Corporate Tax or Excise, it is any overpaid or excess amount that the arithmetic of the return leaves owing to the taxpayer.
Before this Decision, once a return showed a balance due back and the numbers cleared, payment was largely a processing step. The shift is that this residual amount is no longer released automatically while you are under audit and a listed condition applies.
Bottom line: the refund is still your entitlement in principle, but its release can be paused while the audit runs.
How the Rule Interacts With a Tax Audit
The trigger for FTA Decision No. 9 of 2025 is simple. A person must be under a tax audit. Once that is the case, the FTA may decline to release a residual refund if any one of six conditions is met.
Two points deserve emphasis. First, the conditions are alternative, not cumulative. The FTA needs only one to withhold the refund, not all six. Second, a held refund is not the same as a final denial of the underlying entitlement. Depending on the outcome of the audit and the facts, the refund may be released once the review closes, or it may be adjusted where the audit finds a genuine additional liability.
So for a business with a sound position, the practical cost is usually timing and cash flow while the review runs, rather than a lost entitlement. For a business with real exposure, the withheld amount may ultimately be set against what it owes.
Why It Matters Across VAT, Excise Tax, and Corporate Tax
The Decision applies irrespective of which tax generated the credit. This cross-tax reach is the feature many finance teams underestimate.
Consider a business sitting on a VAT repayment while an unrelated Corporate Tax query is open. Because the conditions bite regardless of tax type, and because an outstanding return for any tax can be a trigger, the VAT repayment can be paused because of the Corporate Tax matter. The taxes are administered under one framework, so a problem in one can hold cash in another.
This is why the Decision should be read alongside the broader Corporate Tax obligations set out in the Ministry of Finance Corporate Tax overview and the operational detail on the FTA Corporate Tax portal. A refund position never sits in isolation from your wider compliance status.
The Six Conditions for Withholding a Refund
The FTA may decline a residual refund where any one of the following applies. Conditions one to three concern the substance of the tax position and the integrity of the supply chain. Conditions four to six concern conduct during the audit, and these are the ones most businesses can directly control.
| # | Condition | What it means in practice |
|---|---|---|
| 1 | Likely additional tax exposure | Sufficient evidence suggests significant additional tax liabilities may arise from the audit |
| 2 | Suspicion of tax evasion | Reasonable grounds exist to believe the taxpayer is involved in tax evasion |
| 3 | Supply-chain evasion risk | The refund relates to transactions or goods suspected of being linked to evasion within the supply chain |
| 4 | Outstanding returns | The taxpayer has pending or unfiled returns for any type of tax |
| 5 | Failure to provide information | Requested information or documentation is not supplied within the prescribed timelines |
| 6 | Lack of cooperation | The taxpayer does not cooperate with the FTA during the audit |
Substance-based conditions (one to three)
These triggers turn on the tax position itself. If the audit surfaces evidence of a material additional liability, the FTA can hold the refund until that exposure is resolved. Similarly, where there are reasonable grounds to suspect evasion, or where the credit traces back to a supply chain suspected of evasion, the refund can be paused. These conditions are harder to influence in the moment because they depend on facts the audit uncovers.
Conduct-based conditions (four to six)
These triggers turn on behaviour, and they are where good housekeeping protects you. An unfiled return on any tax, a missed information deadline, or a pattern of slow or unhelpful responses can each be enough to hold a refund, even where the underlying tax position is sound. A refund can be held for reasons that have nothing to do with the merits of the refund itself.
Reader checkpoint: if you have ever left a nil return unfiled or replied late to an FTA query, you have already met a condition that could hold a refund under audit.
Why This Matters for Cash Flow
The practical impact is a treasury issue as much as a tax one. Many businesses build expected refunds into cash-flow forecasts. Exporters and other regular VAT-repayment positions often treat these amounts as reliable inflows.
Under this Decision, any such refund should be treated as contingent while an audit is open. A held refund is not a penalty and does not mean wrongdoing has been found. Conditions four to six can be triggered by administrative slippage alone. But the cash stays with the Authority until the audit position resolves, and that timing gap can strain working capital if it was not planned for.
Because the rule applies from 1 January 2026, this discipline matters for any refund position carried into the 2026 audit cycle.
Business Implications for CFOs and Finance Teams
The Decision changes how finance leaders should think about refunds, audits, and the link between the two. Three shifts stand out.
First, refunds move from certain to contingent during audit. Forecasts and covenants that assumed a refund as guaranteed cash need a contingency for the audit scenario.
Second, compliance across all taxes becomes a refund issue. A lapse in one tax can freeze cash in another, so the whole compliance calendar matters, not just the tax that generated the credit.
Third, audit conduct now has a direct financial consequence. How quickly and completely you respond to the FTA can determine whether cash is released or held. For groups with cross-border and multi-entity structures, this connects to the wider governance work covered by our international tax and transfer pricing teams, since inconsistencies across entities can surface during an audit.
This Decision is one of several recent measures reshaping the compliance landscape, as set out in our review of the key UAE Corporate Tax decisions for FY 2025-26.
How to Respond When a Refund Is Pending During an Audit
If you are under audit with a refund at stake, the response window is tight and your conduct matters. Work through these steps.
- Confirm your filing status across every tax. Check that VAT, Excise, and Corporate Tax returns are all filed and current, including nil returns. An outstanding return anywhere is a condition four trigger.
- Log and calendar every FTA request. Record the date received, the deadline, and the owner. Missing a deadline is a condition five trigger that you control.
- Respond completely, not partially. Piecemeal responses can read as a lack of cooperation. Assemble the full answer before you submit.
- Reconcile the refund to source. Be ready to show how the credit arose, tied back to invoices, returns, and the general ledger.
- Document your cooperation. Keep a record of what you sent and when, so you can evidence timely, full responses if the point is ever questioned.
- Escalate technical challenges early. Where the audit raises a substantive position, engage specialist support before responses harden. Structured help through an audit and dispute resolution process keeps the audit on track and protects the refund position.
So far, you have seen what triggers a hold and how to behave once an audit is open. The next step is building controls so a hold is less likely in the first place.
Controls That Reduce Refund-Hold Risk
The conduct-based conditions are largely within your control. A few standing controls sharply reduce the chance of a hold.
- A single compliance calendar covering VAT, Excise, and Corporate Tax deadlines, with owners and reminders, so no return slips.
- A refund substantiation file kept ready for every material credit position, so documentation is on hand before the FTA asks.
- An FTA request protocol that logs every query, assigns an owner, and tracks the deadline, so responses are always on time and complete.
- Cross-tax reconciliation to one source ledger before filing, so the same transaction is treated consistently across taxes and an audit finds no unexplained gaps.
- Retention discipline so supporting records are available for the periods the FTA can review.
These controls also make ordinary compliance easier, and they connect naturally to broader Corporate Tax governance and audit-readiness work.
A Practical Example
Consider a UAE trading company that regularly exports and therefore sits in a monthly VAT repayment position. It builds those repayments into its cash-flow forecast as reliable inflows.
In early 2026, the FTA opens an audit that touches an unrelated Corporate Tax matter. During the audit, the FTA issues an information request with a set deadline. The finance team, stretched at month end, replies late and only partially. Separately, a dormant subsidiary in the group has an unfiled nil Corporate Tax return.
Two conditions are now in play. The outstanding return is a condition four trigger, and the late, partial response is a condition five trigger. The FTA declines to release the VAT repayment while the audit runs. The company's underlying VAT position is perfectly sound, but the cash is held for reasons that have nothing to do with the VAT itself.
Had the group kept every return current and answered the request in full and on time, neither condition would have applied. The refund would very likely have been released on the normal timeline. This example is illustrative and simplified to show how the conditions bite in practice, rather than to predict any specific outcome.
Common Mistakes to Avoid
Even well-run finance teams stumble on the same points. Watch for these.
- Treating a refund as guaranteed cash during audit. Once you are under audit, the refund is contingent. Build a contingency into the forecast.
- Ignoring returns on other taxes. An unfiled VAT or Excise return can hold a Corporate Tax refund, and vice versa. Every tax matters.
- Missing information deadlines. A late response is a self-inflicted trigger. Calendar every request the day it arrives.
- Sending partial responses. Incomplete answers can read as non-cooperation. Complete the full response before submitting.
- Assuming a hold means wrongdoing. A hold under conditions four to six can follow pure administrative slippage. It is not a finding of fault, but the cash is still held.
- Leaving substantiation until asked. Reconstructing how a refund arose under audit pressure is slow. Keep the file ready in advance.
- Overreading the Decision as a permanent denial. A hold is generally about timing during audit, not an automatic loss of entitlement, though the outcome depends on the audit facts.
Frequently asked questions
What is FTA Decision No. 9 of 2025?
It is a Federal Tax Authority decision, issued on 4 December 2025 and effective from 1 January 2026, that sets the conditions under which the FTA may decline to refund residual tax amounts to a person who is under a tax audit. It applies to VAT, Excise Tax, and Corporate Tax, and sits within the wider tax framework shown on the FTA legislation page.
When can the FTA withhold my tax refund?
The FTA may withhold a residual refund during an audit where any one of six conditions applies: likely additional tax from the audit, suspicion of evasion, supply-chain evasion risk, outstanding returns for any tax, failure to provide requested information on time, or a lack of cooperation during the audit. Only one condition needs to be met.
Does the Decision apply to VAT refunds or only Corporate Tax?
It applies across VAT, Excise Tax, and Corporate Tax. The conditions bite irrespective of the tax type, so a credit arising under any of these taxes can be held if the person is under audit and a condition is met. A problem in one tax can hold a refund generated by another.
Does a withheld refund mean I have lost the money?
Not necessarily. A held refund is generally an administrative pause during the audit, not an automatic denial of the underlying entitlement. Depending on the outcome and the facts, the refund may be released once the audit closes, or adjusted where the audit finds a genuine additional liability.
How can a business avoid having a refund declined?
Keep all returns filed and current across every tax, respond to FTA information requests fully and within the deadlines, cooperate throughout the audit, and keep the documentation that supports the refund ready. Conditions four to six are conduct-based and are largely within your control.
Where does this Decision sit in UAE tax law?
It is a decision-level instrument that implements powers under the primary Tax Procedures and Corporate Tax legislation. For context on the Corporate Tax regime and filing obligations, see the Ministry of Finance Corporate Tax overview, the wider Ministry of Finance tax pages, and the consolidated UAE legislation portal.
How does timely filing reduce my exposure?
Filing on time removes condition four from the table entirely. The FTA has repeatedly stressed early preparation and timely filing, as in its reminder on filing and payment timelines. Keeping current also signals cooperation, which helps across the other conduct-based conditions. You can track new instruments through the FTA news centre.
Conclusion
FTA Decision No. 9 of 2025 changes the status of a tax refund during an audit. From 1 January 2026, a residual amount across VAT, Excise Tax, or Corporate Tax can be held where any one of six conditions is met, and the cross-tax reach means a lapse in one tax can freeze cash generated by another. Crucially, most holds under the conduct-based conditions come from administrative slippage that you can prevent.
The single most useful next step is to run your business against the controls in this article. Confirm every return is filed across all taxes, set up an FTA request protocol with owners and deadlines, and keep a substantiation file ready for each material refund position. To review your exposure before your next audit or filing, you can contact SBC for a confidential conversation. If the FTA opened an audit tomorrow, would your expected refund survive all six conditions?
15/12/25 UAE Tax Restructuring
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