The UAE issued Federal Decree-Law No. 17 of 2025 in October 2025, amending the Tax Procedures Law with effect from 1 January 2026. The changes tighten the timelines around tax credits, refunds and audits, simplify low-impact error corrections, and give the Federal Tax Authority (FTA) power to issue binding directives — reshaping how businesses manage tax risk across VAT, corporate tax and excise.
Key takeaways
- A strict 5-year limitation now applies to tax credits: they must be used or refunded within five years of the end of the relevant tax period, or they expire.
- Refund claims must be filed within 5 years, with narrow exceptions — a 1-year extension for FTA-driven credits and a 90-day window for late-arising credits.
- Errors with no impact on tax payable can be fixed in the next return; a Voluntary Disclosure is required only for FTA-specified categories.
- The tax-audit limitation stays at 5 years but gains structured extensions, reaching 15 years for fraud or non-registration.
- The FTA can now issue binding directives that both taxpayers and the FTA must follow.
- Excise is brought under the same unified limitation regime as VAT and corporate tax.
Why does the 5-year limitation matter?
The 5-year limitation matters because it turns evergreen credits into expiring ones. Previously, tax overpayments and credit balances could sit on account indefinitely, and refund claims could be filed at any time. Under amended Article 9(3) and Article 38, credits must now be utilised or refunded within five years of the end of the relevant tax period, and refund applications must be filed inside the same window.
For businesses that build up credits — exporters, free zones, construction and other capital-intensive sectors — this converts a dormant balance into a use-it-or-lose-it asset. The practical response is to move from ad-hoc refunds to rolling refund management: age every credit, track its expiry, and file well before the deadline. Real estate has a short reprieve, with transitional relief allowing recovery of older credits until the end of 2026, but the direction of travel is clearly toward time-bound tax certainty. In practice, SBC advisers age each credit from the tax-period end and diarise the claim months ahead, because a refund filed in the final weeks leaves no room if the FTA asks for more.
Under the old rules a tax credit was effectively evergreen. From 2026 it carries an expiry date — and a credit left unclaimed past its five-year window is simply lost.
What is easier under the amended Tax Procedures Law?
Amended Article 10(5) removes a genuine irritant: until now, correcting even an error with no effect on tax payable required a formal Voluntary Disclosure. Going forward, a Voluntary Disclosure is needed only for categories the FTA specifically designates; all other nil-impact errors can be corrected in the next tax return.
For high-volume taxpayers — retail, FMCG, telecom, e-commerce — this materially reduces administrative load and the incidental penalties that came with over-disclosing trivial mistakes. The trade-off is that businesses must classify errors correctly, distinguishing the zero-impact items they can sweep into the next return from those that still demand a Voluntary Disclosure. A simple internal error-classification matrix is worth building.
How do the audit and refund timelines interact?
The two timelines interact most sharply through refunds: filing a refund claim extends the FTA's audit window by two years beyond the general five-year limit. Amended Article 46 keeps that general audit limitation at five years but sets out structured extensions, so the audit horizon is now predictable rather than fragmented across different laws.
| Situation | Limitation period |
|---|---|
| General tax audit and assessment | 5 years from the end of the relevant tax period |
| After an audit notice is issued | Extended by 4 years |
| Late Voluntary Disclosure | Extended by 1 year |
| Refund-claim audit | Extended by 2 years |
| Fraud or failure to register | 15 years |
Record-keeping should be aligned accordingly: retain documentation for at least five years, and up to around nine years where audit notices or refund-triggered assessments apply. Businesses with cross-border dealings or transfer pricing exposure should plan on the longer horizon.
Binding directives and a unified regime
New Article 54 (bis) lets the FTA issue binding directives that both it and taxpayers must follow — replacing the previous position where public clarifications carried no explicit statutory force and interpretations varied. That reduces ambiguity and should cut disputes, but it also means directives now carry real weight when you take a tax position, so monitoring and applying them becomes part of compliance.
Separately, the repeal of Excise Tax Law Article 25 (bis) folds excise into the unified Article 46 limitation — five years generally, fifteen in fraud cases — so VAT, corporate tax and excise now share one audit timeline. For multi-tax businesses, that is a welcome simplification that lets internal procedures and audit and dispute readiness be harmonised rather than run in parallel.
Frequently asked questions
When do the UAE Tax Procedures Law amendments take effect?
Federal Decree-Law No. 17 of 2025 was issued in October 2025 and its amendments take effect from 1 January 2026. They apply across the taxes administered under the Tax Procedures Law — VAT, corporate tax and, following the repeal of a separate excise rule, excise tax — under a single unified limitation framework.
What is the new 5-year limitation on tax credits?
Tax credits and overpayments must, from 2026, be utilised or refunded within five years of the end of the relevant tax period, or they expire. Refund applications must also be filed within that window, subject to a 1-year extension for FTA-driven credits and a 90-day window for credits that arise late. Previously no statutory time limit applied.
Do I still need a Voluntary Disclosure for every error?
No. Under the amended Article 10(5), a Voluntary Disclosure is required only for categories of zero-impact errors that the FTA specifically designates. All other errors that do not affect tax payable can simply be corrected in your next tax return, which reduces the administrative burden for high-volume taxpayers considerably.
What are binding FTA directives?
Binding directives, introduced by new Article 54 (bis), are instructions the FTA can issue that both taxpayers and the FTA are required to follow. They give public guidance explicit statutory force, create consistent interpretation across industries, and reduce disputes — but they also mean businesses must track and apply relevant directives when taking tax positions.
How SBC Tax Consulting can help
SBC helps businesses adapt to the 2026 procedural framework: building credit-ageing and refund-monitoring processes so claims are filed before expiry, designing error-classification matrices, and aligning record-keeping to the extended audit horizon. We monitor binding FTA directives, strengthen transfer pricing files ahead of the extended audit window, and represent clients in disputes. Explore our audit and dispute support and corporate tax services, or contact our team to review your refund and compliance position for 2026.
This publication is for general information only and does not constitute professional advice. Please consult your SBC advisor before acting on any matter covered here.