UAE Tax Revolution 2026: New 'Binding Directions' and Refund Deadlines Explained

DUBAI – The United Arab Emirates has officially overhauled its tax administration landscape, introducing pivotal amendments that define exactly how-and when-businesses can claim their money back.

Federal Decree-Law No. 17 of 2025, amending the existing Tax Procedures Law, is set to reshape the financial framework starting January 1, 2026. For CFOs, business owners, and tax professionals across the Emirates, the message is clear: the era of ambiguity is over.

Here is what the new changes really mean for your balance sheet.

The 'Use It or Lose It' Rule

In a move to eliminate open-ended liabilities, the Federal Tax Authority (FTA) has introduced a strict five-year statute of limitations on credit balances.

Previously a grey area, the new law draws a hard line: businesses now have exactly five years from the end of a tax period to request a refund or apply their credit against other liabilities.

However, the law isn't just about restrictions; it introduces a safety net. The amendment allows for refund requests after the five-year window in specific scenarios, including a grace period of 90 days before expiration, ensuring legitimate claims aren't lost due to tight timing.

The 'Golden Window' for Old Claims

Perhaps the most critical update for long-standing businesses is the transitional relief.

If your five-year period for a refund expired before January 1, 2026, or is about to expire shortly after, the government has granted a one-year extension. Starting Jan 1, 2026, taxpayers get a fresh 12-month window to file these "expired" requests.

Why this matters: This is effectively a second chance to recover funds that would have otherwise been written off under strict interpretation.

End of Ambiguity: 'Binding Directions'

One of the biggest friction points in the UAE tax system has been inconsistent interpretation of the law. The new decree grants the FTA the power to issue "Binding Directions."

This is a game-changer for corporate governance. Once issued, these directions apply to both taxpayers and the FTA itself, ensuring that specific transactions are treated consistently across the board. No more guesswork on how complex deals are taxed.

Expanded Audit Powers

While businesses gain clarity, the FTA gains reach. The amendment authorizes the Authority to conduct audits and issue assessments beyond the standard limitation period in defined cases.

For example, if a business files a refund request in the final year of the limitation period, the FTA retains the right to audit that specific claim to ensure accuracy, balancing taxpayer rights with the protection of public funds.

The Bottom Line

These changes are not limited to Corporate Tax. They form the backbone of the entire UAE tax system, applying equally to VAT, Excise Tax, and Corporate Tax.

What you need to do: Review your tax credit balances immediately. With the clock ticking toward the 2026 implementation, ensuring your documentation aligns with the new "Binding Directions" and refund timelines is no longer optional-it’s essential for financial compliance.