18 December 2025
UAE Tax Procedures Law changes as per 1 January 2026
Background
The UAE has introduced significant updates to its tax procedures framework through Federal Decree-Law No. 17 of 2025, amending Federal Decree-Law No. 28 of 2022 on Tax Procedures (Tax Procedures Law). These changes, effective from 1 January 2026, aim to enhance clarity, strengthen compliance, and ensure alignment of procedural standards across all UAE taxes. Below is an overview of the key amendments brought forward by the new law.
Extended limitation periods for tax audits and assessments
Previously, the statute of limitation for tax audits and assessments was generally capped at five (5) years, providing taxpayers with a clear timeframe for potential exposure. Under the new rules, this period can now be extended up to fifteen (15) years in specific circumstances, such as cases involving tax evasion or failure to register for tax purposes. This amendment ensures that the Federal Tax Authority (FTA) has adequate time to investigate complex or high-risk cases, reinforce compliance and discourage deliberate non-disclosure.
Correcting errors in tax returns
In instances where a taxpayer identifies an error or omission in a previously submitted tax return that does not affect the amount of due tax, the correction might be made in the subsequent tax return. However, in the cases specified by the FTA, the taxpayer must correct such error by submitting a Voluntary Disclosure (VD).
Tax refund timelines
The law establishes a stricter timeline for claiming tax refunds on credit balances, such as those arising from overpaid taxes. Previously, businesses could carry forward unused credits indefinitely; however, under the new framework, the right to recover these amounts will lapse if no action is taken within five years. This change applies to all UAE taxes and underscores the need for proactive monitoring of tax positions and timely submission of refund claims.
Binding FTA directives
The FTA has the right to issue binding decisions that provide directives on how the provisions of the Tax Procedures Law and other Federal tax laws should be applied to tax transactions. These decisions, issued without prejudice to existing tax legislation, are binding on both the FTA and taxpayers. They aim to ensure uniform interpretation and consistent implementation of tax laws across all transactions.
Transitional provisions
Under the recent amendments, taxpayers with a tax refund or credit balance outstanding for more than five (5) years from the end of the relevant tax period may apply for a refund or utilize the balance to offset tax liabilities or administrative penalties. Such applications must be submitted within one (1) year from the effective date of the pertinent Tax Procedures Law (e.g., until 31 December 2026). As an exception to the general statute of limitations, the FTA may conduct a tax audit or issue a tax assessment related to these (transitional) refund applications within two (2) years from the date of submission.
Furthermore, as an exception to the rule prohibiting VDs after five (5) years from the end of the relevant tax period, taxpayers may submit a VD concerning a refund application filed during the transitional period (e.g., until December 31, 2026). This must be completed within two (2) years from the date of the refund application, provided the FTA has not issued a decision on the matter.
Key takeaway
The recent amendments to the UAE Tax Procedures Law introduce several important changes that businesses need to be aware of. The amendments aim at reinforcing transparency, compliance, and consistency across all tax types.
Audit and assessment periods can now extend up to fifteen (15) years in certain cases, refund claims must be submitted within five (5) years, and unused credits can no longer be carried forward indefinitely. The law also clarifies procedures for correcting errors and allows the FTA to issue binding directives to ensure consistent implementation of tax rules.