On 25 November 2025, amendments to the Federal Decree-Law No. 28 of 2022 on Tax Procedures were published in the UAE (the “Law”). These amendments set forth in Federal Decree-Law No. 17 of 2025 cover important aspects of tax administration, including tax refunds, the utilization of credit balances, the correction of errors, and the conduct of tax audits. The new version of the Law comes into force on 1 January 2026.
- Overpayments and credit balances held by the FTA can only be used for the settlement of taxes within 5 years.
- A refund application must be submitted no later than 5 years from the end of the relevant tax period (exceptions apply).
- Voluntary Disclosure has a 5-year limit, which is extended if the disclosure relates to a refund application.
- Tax audits have a 5-year look-back period, extended by 2 years if a refund application is filed.
- Errors in tax returns that do not affect the tax amount due can be corrected without submitting a Voluntary Disclosure.
- The amendments become effective on 1 January 2026.
Time limit for utilizing overpayments
If a taxpayer overpays their tax or has a credit balance, the Authority (FTA) can apply that overpayment or credit balance toward any other taxes or liabilities the taxpayer owes. This allocation must be done within five years after the end of the relevant tax period to which the overpayment relates (article 9(3) of the Law).
Consequently, any credit balance that was not utilized in time now lapses after 5 years. The previous version of the Law did not provide for such a time limit.
The FTA can apply the credit balance, or a portion of it, to settle any outstanding amounts a taxpayer owes, prioritizing the oldest debts first (article 9(3) of the Executive Regulation of the Law).
Tax refund – within 5 years only
A taxpayer is entitled to apply for a refund of any overpaid tax (credit balance) if they are legally eligible for such a refund and the balance exceeds the taxes and penalties due.
However, the refund application must be submitted within a period not exceeding 5 years after the end of the tax period for which the overpayment was made or the credit balance arose (Article 38(2) of the Law).
This deadline has two exceptions:
- If the credit balance arose as a result of a decision by the FTA issued after the expiration of the 5-year period or within the last 90 days of this period, the taxpayer may apply for a tax refund within 1 year from the date the credit balance arose.
- If the credit balance arose during the same period (see above), but for other reasons (not as a result of the FTA’s decision), the taxpayer will be able to apply for a refund within 90 days.
If the taxpayer does not file the application within the established deadlines, they lose the right to a refund of the overpaid tax or credit balance.
IMPORTANT: The Law provides for the possibility of a tax refund during the transitional period, even if the 5 years have already expired (or will expire during 2026).
Taxpayers will be able to apply for a refund of the credit balance or utilize it to settle tax liabilities, provided they exercise this right before the end of 2026 (i.e., within 1 year from the effective date of the new version of the Law).
Deadline for submitting a Voluntary Disclosure
A taxpayer is entitled to submit a Voluntary Disclosure only within five years after the end of the relevant tax period.
However, the submission of a Voluntary Disclosure is also permitted at a later date if it is related to an incorrect refund application for which a decision has not yet been made (Article 46(6) of the Law).
If a taxpayer submits a refund application to the FTA before the end of 2026 (this is relevant for “old” overpayments), they may, if necessary, submit a Voluntary Disclosure within two years from the date of submitting the refund application (Article 3(2) of Law No. 17 of 2025).
Tax audits after the expiration of 5 years
As a general rule, the FTA may not conduct tax audits of a taxpayer after the expiration of five years from the end of the relevant tax period (Article 46(1) of the Law).
The new version of the Law introduces an additional exception to this rule (Article 46(4) of the Law):
The FTA may conduct a tax audit after the expiration of five years if such an audit relates to a refund application submitted in the fifth year from the end of the relevant tax period. In this case, the tax audit must be completed within two years from the date the tax refund application was submitted.
Therefore, a taxpayer’s submission of a refund application grants the FTA an extra two years to conduct a tax audit.
Voluntary disclosure of technical errors in tax returns
If a taxpayer discovers an error in a tax return they have filed, as a result of which the tax payable turns out to be less than it should be, they must inform the FTA about this through the Voluntary Disclosure (article 10(1) of the Law).
The same obligation exists for errors in tax refund applications, if a larger amount is claimed for refund than the taxpayer is entitled to. Failure to submit a Voluntary Disclosure when required results in penalties.
The new version of Article 10(5) of the Law stipulates that if an error or omission in a tax return does not affect the amount of tax payable, it must be corrected:
- by submitting a Voluntary Disclosure – in cases established by the FTA; or
- directly in the tax return – in all other cases.
As a result, the submission of a Voluntary Disclosure is now only mandatory for errors in reporting that affect the amount of tax or for those specifically stipulated by the FTA. This change is expected to simplify the process of correcting technical errors and reduce the number of penalties.
Key considerations
The described amendments concern all UAE taxes currently in effect, primarily VAT and Corporate Tax. They establish deadlines for refund applications, the utilization of overpayments, and the Voluntary Disclosures, as well as exceptions to these rules.
Taxpayers with historic overpayments with the FTA are advised to track the final deadline by which they can claim their refund. Missing this deadline results in the loss of the right to the refund. At the same time, submitting a refund application grants the FTA the right to audit the period in question, despite the expiration of the standard 5-year look-back period.
