The United Arab Emirates (UAE) continues to evolve its tax framework to support transparency, fairness, and international best practices. As part of this effort, the Ministry of Finance issued Federal Decree-Law No. 17 of 2025, updating key provisions of the UAE Tax Procedures Law (Federal Decree-Law No. 28 of 2022).
These changes, effective 1 January 2026, are designed to enhance clarity around taxpayer rights and obligations, strengthen compliance standards, and modernise administrative processes across all UAE taxes administered by the Federal Tax Authority (FTA) including corporate tax, VAT, and excise tax.
Why the UAE Tax Procedures Law Update Matters for Businesses
For companies operating in the UAE, whether local small enterprises or multinational corporations, understanding the revised Tax Procedures Law is essential. Not only does it reshape how taxpayers interact with the FTA, but it also introduces defined timelines and processes that can materially impact cash flow, compliance planning, and audit risk.
Key Highlights of the UAE Tax Procedures Law Update
1. Five-Year Time Limit for Tax Credits and Refunds
One of the most significant updates in Federal Decree-Law No. 17 of 2025 is the introduction of a five-year time limit for taxpayers to use or reclaim credit balances such as overpaid tax or excess VAT credits. Previously, under the old regime, the FTA could allocate overpayments or credits without a defined time horizon. However, under the updated law, all credit balances must now be utilised within five years from the end of the related tax period, after which the right to apply credits or request refunds will expire.
This change brings much-needed certainty to businesses by setting a clear deadline for refund claims. It also encourages organisations to proactively monitor their tax positions and file timely refund requests to avoid losing entitlements.
2. Simplified Error Corrections and Voluntary Disclosure Rules
The revised law alters how taxpayers correct mistakes. Previously, taxpayers often had to make a voluntary disclosure for many types of errors. The 2025 amendments differentiate the correction methods into two categories:
- Voluntary Disclosure: Required only for specific cases identified by the FTA.
- Tax Return Submission
This approach simplifies compliance by reducing unnecessary voluntary disclosures and allowing corrections directly through regular return processes, saving time and paperwork for businesses.
3. Enhanced Tax Refund Framework and Transitional Relief
In addition to the five-year limit, the amended Tax Procedures Law provides detailed rules around the submission and review of refund requests. This includes provisions for situations where the credit balance arises after the five-year period or near its expiry. Businesses also now have a one-year transitional window from the law’s effective date to claim refunds or use balances for periods that would otherwise expire under the previous framework.
This transitional relief is particularly useful for companies with historical credit balances that might otherwise disappear due to timing.
4. Stronger and Clearer FTA Audit Powers
The updated law allows FTA audits on refunds and credits beyond five years if completed within two years. This gives FTA a clear legal basis to review taxes while providing taxpayers predictable audit scope and timelines.
5. Official FTA Guidance and Administrative Clarifications
A new provision in the law empowers the FTA to issue official guidelines explaining practical application of the Tax Procedures Law and related tax laws. These guidelines are expected to provide more consistency in tax treatment and help businesses interpret procedural requirements with confidence.
The Federal Decree-Law No. 17 of 2025 advances UAE tax system, standardising procedures, protecting taxpayers, and aligning with global standards. As amendments take effect on 1 January 2026, businesses should review tax positions and processes to ensure compliance and maximise opportunities.
How Businesses Should Prepare for the UAE Tax Procedures Law Update
With the amendments taking effect from 1 January 2026, businesses should:
- Review existing tax credit and refund positions
- Identify credits nearing the five-year expiry
- Update internal tax compliance processes
- Seek professional tax advisory support where required
How Kloudac Supports You Through the UAE Tax Procedures Law Update
The UAE Tax Procedures Law update under Federal Decree-Law No. 17 of 2025 marks a significant advancement in the country’s tax governance framework. By standardising procedures, strengthening taxpayer rights, and modernising processes, the UAE reinforces its position as a transparent, business-friendly jurisdiction.
Early preparation will help businesses remain compliant, safeguard tax entitlements, and fully benefit from the revised law.
Kloudac supports UAE businesses at every stage of this transition. Our tax and compliance experts help you:
- Review and track historical tax credits and refund eligibility
- Ensure timely and accurate tax filings under the updated procedures
- Manage voluntary disclosures and error corrections efficiently
- Prepare for FTA audits with confidence and compliance assurance
As the law takes effect on 1 January 2026, partnering with Kloudac keeps your business compliant, protected, and future-ready under UAE tax rules.
Speak to Kloudac today for expert guidance on navigating the UAE Tax Procedures Law update.