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A New Deadline for UAE Businesses
The UAE has introduced a major change to its VAT refund rules. Under Federal Decree-Law No. 16 of 2025, effective 1 January 2026, businesses now have five years to claim excess VAT credits.
This is the first time the UAE has introduced a statutory time limit for claiming refundable VAT credits. Since VAT began in 2018, businesses have been able to carry forward unused input VAT credits without a clear expiry date. That position has now changed.
If a business does not use an excess VAT credit to offset future VAT liabilities or claim it as a refund within five years from the end of the relevant tax period, the credit will expire permanently. Once the deadline passes, the business cannot recover the amount.
This change is particularly important for businesses with historic VAT credit balances. Companies in industries such as construction, real estate, manufacturing, and large infrastructure projects often accumulate excess input VAT during the early stages of operations. These businesses should review their VAT position as soon as possible.
What has Changed?
The amended VAT law introduces a clear five-year limitation period for refundable VAT credits.
A business must either:
- Use the excess VAT credit to offset future VAT liabilities, or
- Submit a refund claim through EmaraTax.
Both actions must take place within five years from the end of the tax period in which the credit arose.
If neither action happens before the deadline, the remaining VAT credit will lapse permanently.
Unlike a single national deadline, this rule creates separate expiry dates for every tax period. Each VAT return has its own five-year countdown.
How the Five-Year Rule Works
For businesses that submit quarterly VAT returns, the deadlines apply on a rolling basis.
For example:
| Quarter ending 31 March 2021 | 31 March 2026 (already passed) |
| Quarter ending 30 June 2021 | 30 June 2026 |
| Quarter ending 30 September 2021 | 30 September 2026 |
| Quarter ending 31 December 2021 | 31 December 2026 |
This means VAT credits generated during 2021 are expiring throughout 2026.
Businesses that have not reviewed their historic VAT balances may lose valid credits, even if those balances were reported correctly in previous VAT returns.
Why This Matters
Many UAE businesses carried forward excess VAT credits for several years because the previous legislation did not specify when those balances expired.
The new rules remove that flexibility.
Businesses should no longer treat historic VAT credits as permanent assets. Every outstanding balance now has an expiry date. Missing that deadline could result in a permanent financial loss.
Companies with VAT registrations dating back to 2018 should review all outstanding credit balances immediately. Early action allows enough time to prepare refund claims and respond to any questions raised by the Federal Tax Authority (FTA).
Transitional Relief Gives Businesses One Final Opportunity
The government recognised that businesses could not have anticipated the new five-year rule before it came into force. To address this, the amended law includes a one-time transitional relief.
Under this provision, businesses can still claim certain historic VAT credits that would otherwise have expired.
The relief applies to VAT credits whose five-year limitation period:
- Had already expired before 1 January 2026, or
- Will expire within one year after 1 January 2026.
Eligible businesses have until 31 December 2026 to submit their refund claims through EmaraTax.
This transitional relief offers a final opportunity to recover historic VAT credits. After 31 December 2026, businesses will no longer be able to claim these balances.
Which VAT Credits Are Covered?
The transitional relief mainly benefits businesses with VAT credits from 2018, 2019, and 2020.
Without this relief, many of these balances would already be time-barred under the new legislation.
Businesses should not assume these credits remain available indefinitely. The relief only extends the deadline until 31 December 2026.
At the time of writing, neither the Ministry of Finance nor the Federal Tax Authority (FTA) has announced plans to extend this deadline.
Several international advisory firms and legal experts have also confirmed that this relief is intended as a one-time measure rather than an ongoing concession.
For this reason, businesses should begin preparing their refund claims well before the deadline.
Why Early Action Matters
Waiting until the end of the year can create unnecessary risks.
Preparing a historic VAT refund claim often requires businesses to review several years of accounting records. They may also need to reconcile VAT returns, collect supplier invoices, verify import documents, and resolve differences before submitting the claim.
Starting early gives businesses enough time to identify missing information and correct any issues before filing.
It also allows time to respond if the FTA requests additional documents during its review.
Example: How the New Rule Affects a Business
Consider a UAE construction company that accumulated a large input VAT balance during 2020.
During the early stages of a project, the company purchased materials, hired contractors, and incurred significant development costs. However, it generated very little taxable revenue because the project was still under construction.
As a result, the business built up a substantial excess VAT credit.
Under the previous rules, the company could carry that balance forward and offset it against future VAT liabilities as projects progressed.
The new legislation changes this position.
If the company does not use the credit or submit a refund claim before 31 December 2026, the remaining balance will expire permanently.
Even if the original VAT returns were accurate and supported by proper records, the business cannot recover the amount that expired after the deadline.
Businesses Most Likely to Be Affected
Some industries naturally generate higher input VAT than output VAT during their early years.
These businesses often carry large VAT credit balances for extended periods.
Examples include:
- Construction companies
- Real estate developers
- Manufacturing businesses
- Infrastructure projects
- Export-focused businesses
- Capital-intensive industries
Businesses in these sectors should review their historic VAT balances as soon as possible. The earlier they identify eligible credits, the more time they will have to prepare complete refund applications before the deadline.
Keep Supporting Documents Ready
Submitting a VAT refund claim before the deadline does not end the review process.
The Federal Tax Authority (FTA) can still examine refund claims and issue assessments where appropriate. This authority continues even after the five-year limitation period has expired.
As a result, businesses should expect the FTA to review historic refund claims carefully. Claims submitted under the transitional relief may receive additional attention because they relate to older tax periods.
For this reason, businesses should prepare complete and accurate records before filing a claim.
Maintain Complete Documentation
Supporting documents play a key role in every VAT refund claim.
The FTA may ask businesses to provide evidence that confirms the VAT credit is valid. Missing or incomplete records can delay the review process or result in the rejection of part of the claim.
Businesses should organise all relevant documents before submitting a refund request.
Key records include:
- Tax invoices
- Import declarations
- Customs documentation
- VAT return reconciliations
- General ledger reports
- Payment records, where applicable
- Voluntary Disclosure records, if submitted
- Supporting schedules for VAT calculations
Keeping these records organised will make it easier to respond to FTA requests during the review process.
Other VAT Changes Also Affect Refund Claims
The five-year limitation period is only one of several VAT changes introduced in 2026.
The amended legislation also removes the mandatory self-invoicing requirement for certain reverse charge transactions.
As a result, businesses should place greater emphasis on maintaining supplier invoices, import documents, and other supporting evidence.
Strong documentation helps businesses support refund claims and reduces the risk of disputes during an FTA audit.
Why Businesses Should Review Historic VAT Credits Now
Many businesses assume that VAT credits recorded several years ago will always remain available.
That assumption is no longer correct.
Every historic VAT balance should now be reviewed against the new limitation period.
Businesses should identify:
- When the VAT credit arose.
- Whether any part of the balance has already been used.
- Whether the balance qualifies for the transitional relief.
- The final deadline for claiming the remaining amount.
Completing this review early helps businesses avoid unnecessary delays later in the year.
Action Steps Before 31 December 2026
Businesses with VAT registrations dating back to 2018 should act as soon as possible. If you want to estimate your VAT, you can use our VAT Calculator for accurate Calculations and to save time.
The following steps can help protect eligible VAT credits.
1. Review Outstanding VAT Credits
Prepare a complete schedule of all outstanding input VAT balances.
Group each balance by tax period to identify the applicable deadline.
2. Check Eligibility
Compare each VAT credit against:
- The standard five-year limitation period.
- The one-time transitional relief.
This review will show which balances remain recoverable.
3. Prepare Refund Applications Early
Do not wait until the final weeks of December.
Preparing a historic refund claim often takes time. Businesses may need to reconcile accounts, locate missing invoices, or correct historical records before filing.
Submitting claims early also gives businesses time to respond to FTA requests for additional information.
4. Organise Supporting Evidence
Before filing a refund claim, confirm that all supporting records are complete.
These records may include:
- VAT invoices
- Import documentation
- Accounting reconciliations
- Customs records
- Voluntary Disclosures
- Working papers used to calculate the refund
Well-organised documentation can speed up the review process and reduce the likelihood of delays.
5. Seek Professional Advice
Historic VAT balances can be difficult to review, especially for businesses with several years of transactions.
Professional VAT advisers can help businesses:
- Reconcile historic VAT balances.
- Confirm which credits remain recoverable.
- Prepare refund applications.
- Respond to FTA information requests.
- Reduce the risk of errors during the claim process.
Professional support can also help businesses meet the deadline with greater confidence.
Don't Leave Historic VAT Credits Unclaimed
Historic VAT credits are no longer open-ended assets.
Under the amended VAT law, every refundable VAT balance now has a clear deadline.
Businesses that fail to act before the relevant deadline risk losing those credits permanently.
For many businesses, the transitional relief ending on 31 December 2026 represents the final opportunity to recover historic VAT balances.
Taking action now can help protect cash flow, strengthen compliance, and prevent avoidable financial losses.
Frequently Asked Questions
What happens if I do not claim my VAT credit within five years?
Under Federal Decree-Law No. 16 of 2025, effective 1 January 2026, businesses have five years to use excess VAT credits or claim a refund. If the deadline passes, the remaining credit expires permanently and cannot be recovered.
I have VAT credits from 2018, 2019, or 2020. Can I still claim them?
Yes, but only if they qualify for the transitional relief.
The amended law gives businesses a one-time opportunity to claim eligible historic VAT credits through EmaraTax. The deadline is 31 December 2026.
After this date, the transitional relief ends. The legislation does not provide any further extension.
Does the FTA still review refund claims submitted before the deadline?
Yes.
Submitting a refund claim before the deadline does not prevent the Federal Tax Authority (FTA) from carrying out an audit.
The FTA can review supporting documents, request additional information, and issue assessments where appropriate. Businesses should keep complete records for every refund claim.
How can I identify VAT credits that may expire?
Start by preparing a list of all outstanding VAT credit balances.
Review each balance against:
- The tax period in which the credit arose.
- The standard five-year limitation period.
- The transitional relief provisions.
This review will help you determine which balances remain recoverable and which deadlines apply.
Which businesses should review their VAT position?
Every VAT-registered business should review its historic VAT balances.
However, businesses in the following sectors are often at greater risk because they usually accumulate larger input VAT balances:
- Construction
- Real estate development
- Manufacturing
- Trading
- Infrastructure projects
- Export businesses
These businesses should begin reviewing historic VAT credits well before the deadline.
Final Thoughts
The introduction of a five-year limitation period marks one of the most significant changes to the UAE VAT system since its introduction in 2018.
Historic VAT credits can no longer remain on the balance sheet indefinitely. Every refundable balance now has a defined expiry date.
The transitional relief available until 31 December 2026 gives businesses one final opportunity to recover eligible VAT credits that might otherwise be lost.
Businesses should review their VAT records, reconcile outstanding balances, and prepare refund applications as early as possible. Taking action now can protect cash flow and reduce the risk of losing valuable VAT refunds.
Need Help Recovering Historic VAT Credits?
NR Doshi & Partners helps businesses across the UAE review historic VAT positions and recover eligible VAT credits before the deadline.
Our VAT specialists can help you:
- Reconcile historic input VAT balances.
- Identify credits that remain recoverable.
- Review supporting documentation
- Prepare refund applications through EmaraTax.
- Respond to FTA information requests.
- Strengthen VAT compliance
Whether you operate in Dubai, Abu Dhabi, Sharjah, Ajman, Ras Al Khaimah, Fujairah, Umm Al Quwain, or across the UAE, our experienced VAT professionals can guide you through every stage of the refund process.
Speak with our VAT Advisory team before 31 December 2026 to protect your historic VAT credits.
About the Author
NR Doshi & Partners – VAT Advisory Team
Written by the VAT Advisory team at NR Doshi & Partners- an accounting firm in Dubai that supports businesses across the UAE with VAT compliance, refund claims, VAT reconciliations, EmaraTax filings, and tax advisory services.
The team works with businesses in construction, real estate, manufacturing, trading, logistics, healthcare, retail, and professional services. Their practical experience helps clients navigate complex VAT matters while ensuring compliance with UAE tax regulations.
