UAE Announces Comprehensive Tax Procedure Overhaul
The United Arab Emirates has unveiled significant amendments to its Tax Procedures Law that will take effect from January 1, 2026. These reforms, established through Federal Decree-Law No. (17) of 2025 and No. 16 of 2025, aim to streamline refund processing, clarify limitation periods, and enhance the Federal Tax Authority's capabilities during audits and investigations.
Key Changes in Tax Procedures
The amendments introduce a clearer five-year window for refund claims, expanded FTA audit and enforcement authorities, and transitional rules for taxpayers with credit balances. These changes are designed to boost transparency and accelerate dispute resolution while aligning the UAE's financial policies with global best practices.
One of the most significant updates establishes a definitive statute of limitations for financial claims and corrections. Both the FTA and taxpayers are now limited to a maximum period of five years from the end of the relevant tax period to take action regarding refunds or credit applications.
Five-Year Refund Window Explained
The new five-year rule provides certainty for businesses regarding their historical tax positions. Taxpayers must request refunds of any credit balance or use it to settle outstanding tax liabilities within this timeframe. Similarly, the FTA can only apply a taxpayer's credit or overpayment to outstanding obligations within the same five-year limit.
The law includes flexibility provisions for late claims. If credit balances arise after the standard five-year period expires or within the final 90 days of that period, taxpayers receive an additional window to submit refund applications. For balances that expired before January 1, 2026, or will expire within one year of that date, businesses have a transitional period until January 1, 2027 to seek refunds.
Streamlined Business Processes
The amendments introduce several simplifications to reduce administrative burdens. Taxpayers will no longer need to issue tax invoices to themselves when importing certain goods or services for business use, significantly simplifying compliance for international trade.
Errors not covered by specified correction cases can now be fixed directly through tax returns, eliminating the need for complex voluntary disclosure procedures in many instances. However, the law tightens input tax deductions, disallowing them if the supply is part of a transaction chain linked to tax evasion and the taxpayer was aware of this connection.
A crucial new provision grants the FTA authority to issue official, binding directions regarding tax legislation application, ensuring unified interpretation and reducing confusion across different tax scenarios.
R&D Tax Incentives Launching 2026
In a strategic move to boost innovation, the Ministry of Finance is implementing powerful incentives under the Corporate Tax Law. The Research and Development Tax Incentive takes effect for tax periods starting on or after January 1, 2026.
This expenditure-based tax credit offers 30% to 50% tax credit on eligible R&D costs and will be refundable, meaning companies could receive direct cash payments for R&D expenses depending on their UAE revenue and employee count. The qualifying R&D activities will align with international standards outlined in the OECD's Frascati Manual guidelines.
Preparing for the 2026 Changes
The UAE's tax amendments represent a clear move toward a more transparent and internationally aligned business environment. Businesses gain certainty through fixed refund windows and opportunities through significant R&D tax credits. The simplified rules and binding FTA directions promise reduced administrative confusion.
Companies operating in the UAE should use the coming year to assess these changes and prepare their financial systems for the new 2026 tax landscape. These reforms strengthen the UAE's tax framework, making compliance easier while creating attractive conditions for innovation and business growth.
