Updates To The Uae’s Tax Procedure Law

By Author: MIO & Partners
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The UAE Ministry of Finance has announced important updates to the country’s tax legislation. Starting 1 January 2026, Federal Decree-Law No. 17 of 2025 will amend the existing Tax Procedures Law (Federal Decree-Law No. 28 of 2022) (the “TPL”).

The new legislation represents a material shift in the UAE’s tax architecture. Beyond procedural updates, it introduces strict ‘use-it-or-lose-it’ deadlines for capital recovery, modifies the scope of long-term liability, and provides a formal mechanism to secure binding rulings on complex commercial transactions.

Below is our breakdown of these changes and their strategic implications for taxpayers in the UAE.

Allocations of Payment
The amendment to Article 9 refines the rules on how the Federal Tax Authority (FTA) can allocate funds. Specifically, the new Clause (3) grants the FTA the authority to allocate any excess payment or credit balance to settle other taxes or amounts owed by the taxpayer.

However, this ‘power of allocation’ is tied to the new limitation periods: the Authority is legally bound to perform this set-o] within the ...
... five-year statutory limitation period.

For taxpayers, this confirms that tax credits are not indefinite assets. If you owe tax in one area (e.g., Corporate Tax) but have a credit in another (e.g., VAT), the Authority can o]set these liabilities, but strictly within the five-year window. This provision protects taxpayers from having current liabilities settled using dormant credits that should have legally expired. This is a positive change for taxpayers, as it e]ectively prevents the Authority from reaching back into closed tax periods, ensuring a clean break from your past financial history.

Correction of Errors
Under the previous framework, any error in a Tax Return (even those with no financial impact) required a formal Voluntary Disclosure (VD).

For taxpayers, this confirms that tax credits are not indefinite assets. If you owe tax in one area (e.g., Corporate Tax) but have a credit in another (e.g., VAT), the Authority can o]set these liabilities, but strictly within the five-year window. This provision protects taxpayers from having current liabilities settled using dormant credits that should have legally expired. This is a positive change for taxpayers, as it e]ectively prevents the Authority from reaching back into closed tax periods, ensuring a clean break from your past financial history.

This amendment reduces the compliance burden. It allows taxpayers to correct non-financial errors efficiently without exposing themselves to the scrutiny and penalty risks associated with a formal Voluntary Disclosure process.

Tax Refund Claim
Previously, the absence of an explicit cap on refund timeframes created legal ambiguity regarding long-standing credits. The new Article 38 resolves this by introducing a strict statute of limitations.

To preserve your right to a refund, an application must be submitted within five years from the end of the relevant tax period. There are narrow legal exceptions:

If the credit balance arises from an FTA decision issued after the 5-year expiry (or within the last 90 days of it), the taxpayer has a one year statutory windown to claim the refund.
For other cases arising late in the period, a 90-day filing window applies.
For taxpayers holding long-standing VAT credits, immediate action is required. We recommend a strategic review of your financial position to identify pre-2021 balances. Failure to file these claims before the 2026 enactment will result in the permanent forfeiture of your right to these funds.

Statute of Limitation
Under standard rules, the FTA is time-barred from conducting a tax audit once five years have elapsed. However, the amendments introduce a critical exception regarding the “final year” of this period.

If your business files a refund request or voluntary disclosure during the final year of the limitation period, the FTA is granted an additional two years to audit that specific period.

This closes the gap where refunds might be filed last-minute to avoid scrutiny. Taxpayers must be aware that submitting a refund request or voluntary disclosure near the five-year mark acts as a trigger, extending the Authority’s right to audit that specific period by an additional two years.

FTA Directives
This new provision empowers the FTA to issue decisions containing guidance on the application of the law to specific tax transactions. These decisions are binding upon both the Authority and the Taxable Person.

Final Notes
This introduction of binding guidance is a positive step toward a more mature tax environment. It offers taxpayers a formal mechanism to seek clarity on how the law applies to specific, complex scenarios, such as corporate restructuring, M&A deals, or major investments. While the practical application will depend on the FTA’s procedures, this tool has the potential to significantly enhance predictability and support better-informed commercial decision-making.

MIO & Partners provides clients with specialist legal support, planning and strategy to achieve optimal outcomes for their business and personal interests in the UAE. Should you require support, please contact Moamen Al Maghrabi, our tax law specialist, to arrange an intial discussion.