As 2026 draws to a close, UAE businesses registered for VAT face a statutory cut-off that cannot be extended: 31 December 2026. It is the last day to file refund requests for credit balances whose five-year window has already expired, or will expire within one year of 1 January 2026. The deadline comes from Federal Decree-Law No. (16) of 2025, amending the VAT Law, and Federal Decree-Law No. (17) of 2025, amending the Tax Procedures Law. Both took effect on 1 January 2026.

1. A five-year limit on recovering excess input tax

Excess recoverable input tax may be carried forward or refunded only within five years of the end of the tax period in which it arose (Article 74(3) of the VAT Law, as amended). Once that period lapses, the right to offset or refund is lost. The rule is reinforced by Article 38 of the Tax Procedures Law, which requires a refund application for a credit balance to be filed within five years of the end of the relevant tax period, failing which the claim is forfeited.

Special rules apply where a credit arises from a Federal Tax Authority (FTA) decision issued after the five-year window or within its last 90 days. Depending on the case, the taxpayer then has either one year or 90 days to claim it (Article 38(3) to (6)).

2. Transitional relief and the 31 December 2026 deadline

To avoid retroactive prejudice, Article 3 of the Tax Procedures Law allows taxpayers whose five-year period expired before 1 January 2026, or expires within one year of that date, to request a refund or to apply the credit against outstanding liabilities. In practice, these pending requests must be filed before the end of 31 December 2026. Key consequences include:

• A voluntary disclosure may be filed within two years of the request if the FTA has not decided it.
• The FTA may issue an audit or assessment notice on the refund request within two years of its submission, even after the five-year period has run.
• If requested within one year of 1 January 2026, an approved credit may be applied against tax due or administrative penalties.

3. Reverse charge: no self-invoice required

Article 48(1) relieves businesses that import goods or services for business use from issuing a self-invoice under the reverse charge mechanism. The relief is not a licence to relax documentation: a self-invoice may still be needed to support input tax recovery where supplier documents are unavailable. Businesses should keep a file sufficient to defend the deduction on audit.

4. Supply-chain diligence and anti-evasion

Article 54 now contains three new clauses allowing the FTA to deny input tax recovery where a supply forms part of an evasion arrangement that the taxpayer knew, or should have known, about. A taxpayer is treated as aware if it failed to verify the validity and integrity of the supply. Due diligence on suppliers is therefore no longer merely good practice; it protects the right to deduct. Article 79 bis, on limitation, was repealed to align with the Tax Procedures Law, while Article 46 keeps the default five-year period for FTA audits and assessments, with exceptions. One of them gives the FTA two further years where a refund claim is filed in the fifth year.

5. Voluntary disclosure and minor errors

Article 10(5) of the Tax Procedures Law narrows the role of voluntary disclosure. Nil-impact or minor errors can now be corrected directly in the relevant return, and the FTA will specify later the cases in which a disclosure remains mandatory.

Practical steps for businesses now

• Map every credit balance generated since 2021 and flag tax periods approaching their five-year limit.
• File pending refund requests before 31 December 2026, with full supporting documents and proof of the filing date.
• Review supplier files and due diligence for higher-risk supplies.
• Update the reverse charge documentation process in line with Article 48.
• Take legal and tax advice before responding to any FTA audit or assessment notice.

Conclusion: The right to recover VAT is no longer open-ended, and a credit left unclaimed past its deadline may be lost for good. Mohamed Al Azazi Advocates & Legal Consultants advises businesses on reviewing their VAT positions, preparing refund requests, responding to FTA notices and appearing before the competent authorities.

Disclaimer: This article is for general legal information only and does not constitute legal advice. Please consult the official texts and obtain specialist advice before acting.