The UAE has issued amendments to its Tax Procedures Law that take effect from 1 January 2026, aiming to simplify refund processing, clarify limitation periods and strengthen the Federal Tax Authority’s (FTA) powers during audits and investigations. Key changes include a clearer five-year window for refund claims, expanded FTA audit and enforcement authorities, and transitional rules for taxpayers with credit balances. These reforms are intended to boost transparency and speed up dispute resolution.UAE tax procedure amendments 2026 The United Arab Emirates (UAE) is ushering in a new era of tax clarity and transparency. Following the issuance of Federal Decree-Law No. (17) of 2025 and No. 16 of 2025, which amend the Tax Procedures Law and the VAT Law, significant changes are set to take effect on January 1, 2026.These amendments, announced by the Ministry of Finance, align the UAE’s financial policies with global best practices, aiming to strengthen business confidence, reduce administrative burdens, and ensure fairness across the board. Every change is designed to add structure, making compliance easier for businesses while securing the financial entitlements of the Federal Tax Authority (FTA).Five-year ruleOne of the most crucial updates introduces a definitive statute of limitations for financial claims and corrections, replacing previous open-ended timelines with hard deadlines. This provides certainty for businesses regarding their historical tax positions.
- The Five-Year Window: Both the FTA and taxpayers are now limited to a maximum period of five years from the end of the relevant tax period to act.
- For Taxpayers: You must request a refund of any credit balance or utilize it to settle outstanding tax liabilities within this five-year window.
- For the FTA: The Authority can only apply a taxpayer’s credit or overpayment to outstanding tax obligations within this same five-year limit.
- Flexibility for Late Claims: Recognizing the need for protection, the new law grants flexibility for certain late refund requests:
- If your credit balance arises after the standard five-year period has expired, or within the last 90 days of that period, you will be given an additional window to submit your refund application.
- For credit balances that expired before January 1, 2026, or will expire within one year of that date, businesses have a one-year transitional period (until January 1, 2027) to seek a refund.
- Audit Exception to the Limit: To balance taxpayer rights with the state’s financial entitlements, the FTA is allowed to conduct an auditor issue an assessment after the five-year limitation period in specific cases. This applies when a taxpayer submits a refund request in the final (fifth) year. However, this extended audit must be completed within two years from the date the refund or credit claim was submitted.
Making business easier
The amendments to the VAT Law and Tax Procedures Law include several changes aimed at streamlining processes and reducing complexity for day-to-day operations.Taxpayers are no longer required to issue a tax invoice to themselves when importing certain goods or services for business use. This minor adjustment significantly simplifies the compliance and administrative process for international trade. Errors not covered by specified correction cases can now be fixed directly through the tax return itself, eliminating the need for more complex voluntary disclosure procedures in many instances. This streamlines the correction process, saving time and effort.The law tightens one key area: input tax deductions will be disallowed if the supply is part of a transaction chain linked to tax evasion and the taxpayer was aware of this connection when claiming the deduction. This emphasizes due diligence and compliance integrity.A crucial new provision grants the FTA the authority to issue official, binding directions regarding the application of tax legislation. This means the FTA can unify the interpretation of tax rules for both itself and taxpayers, significantly reducing confusion and inconsistency across different tax scenarios.
R&D tax credit 2026
In a strategic move to boost the knowledge economy, the Ministry of Finance is implementing powerful incentives under the Corporate Tax Law, with the Research and Development (R&D) Tax Incentive set to take effect for tax periods starting on or after January 1, 2026.
- Significant Financial Benefit: This incentive is designed as an expenditure-based tax credit, potentially offering a generous 30% to 50% tax credit on eligible R&D costs.
- Refundable Credit: The credit will be refundable, meaning companies could potentially receive a direct cash payment for R&D expenses, depending on their revenue and employee count in the UAE.
- Global Alignment: The definition and scope of the Qualifying R&D activities will be aligned with the international standards outlined in the OECD’s Frascati Manual guidelines, ensuring that the incentive supports globally recognized innovation. This move is expected to drive substantial investment in research, technology, and economic growth within the UAE.
Looking aheadThe UAE’s tax amendments, effective January 1, 2026, are a clear move toward a more transparent and internationally aligned business environment.For businesses, this means certainty, knowing your refund window is fixed at five years, and opportunity, accessing significant tax credits for R&D investment. The simplified rules, including the issuance of binding directions by the FTA, promise less administrative confusion.The overall message is positive: the UAE is strengthening its tax framework to make it easier to comply and more attractive to innovate. Businesses should use the remainder of the coming year to assess these changes and prepare their financial systems for the new 2026 landscape.
