Tax legislation is changing in the UAE

From January 1, 2026, the UAE will implement significant changes to its tax legislation.

The UAE Ministry of Finance has announced a major reform of the country’s tax framework. Federal Law No. 17 of 2025 introduces amendments to the core Federal Law No. 28 of 2022 on tax procedures and will come into force at the beginning of next year.

The reform is aimed at improving the efficiency of the tax system, simplifying compliance for businesses and enhancing transparency across financial processes.

Overpayment refunds: five-year filing window.
One of the key changes is the introduction of a fixed five-year period for claiming refunds of overpaid taxes. Taxpayers will be able to apply to the Federal Tax Authority (FTA) for a refund of a credit balance or offset it against future tax liabilities within five years from the end of the relevant tax period.

Certain exceptions apply. A claim may be submitted after the five-year deadline if the credit balance arose after the expiry of that period or within its final 90 days. According to the Ministry, this approach will provide greater financial certainty and help streamline tax procedures.

Expanded powers of the tax authority.
Under the new law, the FTA will receive broader authority to conduct audits and issue decisions even after the statute of limitations has expired in specific cases, such as when a refund request is submitted during the final year of the allowed period.

This measure is intended to balance taxpayer protection with the state’s fiscal interests.

Official guidance from the FTA.
The tax authority will also gain the right to issue binding guidance on how tax legislation applies to specific transactions. The objective is to standardize interpretation, eliminate inconsistencies and improve the overall effectiveness of the tax system.

Transitional period for businesses.
To ensure fairness, transitional provisions have been introduced. Taxpayers with credit balances whose five-year period expired before January 1, 2026, or expires within one year after that date, will be allowed to submit refund claims within one year from the law’s effective date.

In addition, taxpayers will have the option to voluntarily disclose information related to their claim within two years from the date of submission, provided that the FTA has not yet issued a final decision.

International standards and competitiveness.
The Ministry emphasizes that the reform reflects the UAE’s commitment to aligning its tax system with leading international practices.

It is expected that the changes will reduce administrative burdens on businesses, strengthen trust in the tax framework and ensure the sustainability of government revenues. Over the long term, the reform is set to enhance the competitiveness of the UAE’s financial environment on the global stage.