On November 25, 2025, the UAE Ministry of Finance released two landmark legislative updates that will reshape how businesses interact with the Federal Tax Authority starting January 1, 2026. Federal Decree-Law No. 16 of 2025 (VAT amendments) and Federal Decree-Law No. 17 of 2025 (Tax Procedures Law overhaul) represent the most substantial changes to UAE tax administration since the current framework was established.
While the Tax Procedures Law amendments are more extensive and consequential, both decrees demand immediate attention from every business filing taxes in the UAE—whether you deal with Corporate Tax, VAT, or Excise Tax.
At Finzoryx, we're closely tracking these changes because they signal a pivotal shift in how compliance, refunds, and audits will work. Here's what's changing and why your business should act now.
The Big News: Refund Clock Is Ticking
The most game-changing amendment? A strict five-year limitation period for refunding credit balances, replacing the previous system where credit balances could remain indefinitely without statutory expiry.
This sounds simple. It's not.
What it means: If your business has overpaid tax, you now have exactly five years from the end of the relevant tax period to request a refund or use that credit to settle other tax liabilities. If you don't request it, the balance is forfeited. Permanently.
Example: If you overpaid VAT in 2024, your deadline to claim that refund is the end of 2029. Miss that deadline, and the money is gone.
Why this matters: Many UAE businesses have carried forward credit balances for years without thinking twice about them. Some have forgotten entirely that these credits exist. Under the new system, that negligence becomes costly.
The Transitional Lifeline (But It's Temporary)
Before you panic, there's relief built in—but it's temporary and specific.
Taxpayers whose five-year period has already expired before January 1, 2026, or will expire within one year from that date, can submit refund requests within one year from January 1, 2026. That means you have a second window of opportunity if your original five-year limit passed.
But there's a catch. You can also submit a voluntary disclosure related to that request within two years of filing, but only if the FTA hasn't already issued a decision.
Action required: If you have old credit balances sitting in your tax account—whether from 2018, 2019, 2020, or even 2024—pull your tax records immediately. There's a limited window until December 31, 2026, to claim refunds for tax periods 2018–2020, after which the right to recover permanently expires.
This is not a drill. Businesses could be leaving millions in AED on the table.
How The FTA's Audit Powers Expand (And Why You Should Care)
Under the old regime, the FTA couldn't audit a taxpayer more than five years after the relevant tax period. That limitation was pretty clear-cut.
Not anymore.
The Federal Tax Authority may now conduct audits or issue assessments after five years from the end of the relevant tax period except in specified cases, including fraud or tax evasion. The authority can also audit if you file a refund request in the final year of the limitation period—allowing the FTA to verify accuracy of claims submitted close to the deadline.
What this means: The FTA can now dig into your records beyond the traditional five-year window in specific circumstances. If you're claiming a refund for a 2023 tax period in December 2028 (year five), the FTA can open an audit to confirm your claim is legitimate.
Implication: Don't assume you're "clear" after five years. If you plan to claim refunds or dispute assessments, the FTA retains extended audit powers. Document retention and audit readiness become year-round obligations.
Binding Directions: The End of Ambiguity (In Theory)
Here's something genuinely positive: The FTA now has authority to issue official, binding directions clarifying how specific tax provisions should be applied to both taxpayers and the FTA itself.
This addresses a long-standing complaint in UAE tax practice: different interpretations of the same rule leading to inconsistent treatment.
What changes: If the FTA issues a binding direction on how to treat a particular transaction type, both you and the FTA are bound by it. This creates predictability and reduces the risk of audit surprises.
For businesses like yours: This is particularly valuable for complex structures—multinational enterprises dealing with transfer pricing, free zone businesses navigating nexus rules, or fund managers applying composite supply principles. A binding direction from the FTA becomes a safety harbor.
The VAT Law Amendments (Federal Decree-Law No. 16)
While less extensive than the Tax Procedures overhaul, the VAT amendments deserve attention.
The decree introduces select changes to Federal Decree-Law No. 8 of 2017. The Ministry of Finance hasn't released detailed public guidance on every amendment yet (the FTA typically follows with clarifications), but early analysis suggests changes focus on:
- Refining provisions on deemed supplies and exemptions
- Clarifying VAT treatment in specific scenarios
- Aligning VAT administration with the new Tax Procedures framework
Bottom line: The detailed impact will become clear once the FTA publishes guidance documents. We expect clarification by Q1 2026.
Who's Most Affected?
These amendments hit different businesses differently:
Multinational Enterprises & Large Groups: The expanded audit window and binding directions provide strategic opportunities to resolve long-standing interpretive issues with the FTA before disputes arise.
Businesses with Credit Balances: You're in the spotlight. Identify all overpaid taxes immediately. If you're sitting on credits from 2018–2024, you're racing against a December 2026 deadline.
Export-Heavy Businesses: VAT refund claims are common. With the new five-year window, timeline management becomes critical.
Fund Managers & Financial Services Firms: The binding directions provision could help clarify complex supply treatment issues.
SMEs & Startups: If you've overpaid VAT during setup phases or carried forward credits without tracking, this is your wake-up call.
What Finzoryx Recommends: Four Steps to Take Now
1. Audit Your Tax Account
Pull complete records from your FTA account. Identify all credit balances, their source, and their age. Calculate your remaining time before the five-year window closes for each balance.
2. Quantify Your Exposure
Run the numbers. How much in credits are at risk of forfeiture? For many businesses, this figure is substantial—sometimes hundreds of thousands of AED.
3. File Refund Requests Strategically
Don't file everything at once. Prioritize balances closest to expiry. Consider whether to request refunds, use credits to offset liabilities, or pursue both. Phased filing also allows you to address FTA questions on earlier requests before filing newer ones.
4. Document Audit Readiness
With the FTA's expanded audit window, ensure your documentation is bulletproof. This is where AI-driven compliance platforms like our Penalty Shield product help—flagging risks in real-time and ensuring your VAT/Corporate Tax positions align with regulatory requirements.
The Bigger Picture: UAE Tax System Modernization
These amendments reflect the UAE's deliberate evolution toward a more structured, predictable tax environment. The introduction of:
- Clear refund timelines
- Binding directions authority
- Streamlined audit procedures
- Transitional relief provisions
...all signal that the FTA is modernizing beyond the 2017-2022 framework toward international best practices.
For investors, multinationals, and growing businesses, this is positive. Predictability reduces compliance risk. For businesses with legacy tax positions or forgotten credit balances, it's urgent.
Timeline: What Happens When
| Date | Event |
| Jan 1, 2026 | New Tax Procedures Law takes effect. Five-year refund window becomes binding. Binding directions authority activates. |
| Jan 1, 2026 – Dec 31, 2026 | Transitional period for businesses with expired or expiring five-year refund windows. Submit claims during this window or lose rights. |
| Dec 31, 2026 | Hard deadline for claiming refunds for tax periods 2018–2020. After this date, forfeiture is permanent. |
| April 2026 | Cabinet Decision No. 129 (penalty alignment) takes effect. VAT and Excise penalties align with Corporate Tax framework. |
Final Word
The November 2025 amendments aren't flashy, but they're consequential. The five-year refund window alone could affect your cash flow and financial planning. The expanded audit window changes how you should approach compliance going forward.
The key is acting now—before January 1, 2026 arrives. Businesses that audit their tax positions, identify refund opportunities, and prepare documentation will navigate the new regime smoothly. Those that wait will find themselves scrambling against hard deadlines and facing forfeited credits.
At Finzoryx, we're helping clients map out their tax positions against these new rules. Our Penalty Shield AI platform is particularly powerful for identifying compliance gaps and quantifying refund exposure—exactly what you need to maximize the benefits of these amendments while minimizing risk.
Connect with us at: connect@finzoryx.com
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