In a step that once again confirms its commitment to fostering one of the most advanced and agile investment environments, the United Arab Emirates has recently made headlines with the announcement of a new package of pivotal tax amendments. These changes are not mere procedural updates—they represent a restructuring of the operational framework between businesses and regulatory bodies, with the ultimate goal of achieving the highest levels of transparency and financial efficiency.
As 2026 approaches, attention is turning toward the measures that the Federal Tax Authority (FTA) will begin implementing. These developments touch on sensitive and critical areas for all taxpayers, from defining time limits for claiming credit balance refunds to expanding the scope of statute-of-limitation considerations during tax audits.
Understanding these updates is not optional—it is a strategic necessity to ensure compliance and avoid financial consequences. Continue reading to explore the details of these amendments and how they will shape the UAE’s new tax landscape.
What Are the Key Tax Amendments Related to Credit Balance Refunds?
One of the most important elements of the recent tax amendments, issued under the Federal Decree-Law, is the establishment of a clear timeframe for requesting credit balance refunds.
Under the new law, taxpayers are granted a maximum period of five years to submit a refund request for any outstanding credit balance owed by the Federal Tax Authority (FTA), starting from the end of the tax period in which the balance arose.
This fixed timeframe aims to enhance financial discipline and provide greater clarity regarding taxpayers’ rights and obligations. It is also closely linked to tax audit rules, allowing the FTA to conduct efficient reviews during this period, while offering flexible transitional provisions for older balances to ensure taxpayers do not lose their rights.
Do These Amendments Affect Existing Tax Types or Only Procedures?
The recent changes announced by the UAE primarily affect tax procedures and compliance mechanisms, without altering the current tax rates or scope.
These amendments—implemented by the Federal Tax Authority (FTA)—focus on improving system efficiency and simplifying processes. They regulate procedural deadlines, clarify legal mechanisms, and expand the FTA’s authority regarding statute-of-limitation periods and tax audits in specific cases. This strengthens oversight and compliance without modifying the fundamental rules for calculating or paying taxes.
What Happens to Old Credit Balances That Are More Than Five Years Old?
The new Federal Decree-Law specifically addresses this scenario by introducing transitional provisions that provide flexibility and additional time for taxpayers.
Although the amendments establish a maximum five-year period for refund requests, the transitional rules ensure that older accumulated credit balances are not forfeited. They state the following:
• If a credit balance arose and its five-year period expired before 1 January 2026, or if it is due to expire within one year from that date (i.e., during 2026), the taxpayer is granted an additional one-year grace period.
• Taxpayers may submit refund requests for these old balances within one year from the effective date of the new law (starting 1 January 2026).
This provision ensures fairness and allows taxpayers a final opportunity to reclaim balances that would otherwise lapse under the new rules.
Can Credit Balances Be Used to Offset Other Tax Liabilities?
Yes. Taxpayers in the UAE can use their credit balances to offset other outstanding tax liabilities.
Under the new procedures issued by the Federal Tax Authority (FTA), taxpayers may use their credit balances to settle any due tax obligations during the permitted five-year refund period.
This offers businesses significant flexibility in managing cash flow and fulfilling tax obligations without submitting a separate refund request for every balance.
What New Powers Does the Federal Tax Authority Have Regarding Legal Interpretation?
One of the most notable updates is the enhancement of the Federal Tax Authority’s (FTA) power to issue binding official guidance on the interpretation and application of UAE tax legislation.
These new powers aim to:
• Unify interpretation: Ensure consistent and stable understanding of tax laws among FTA staff and taxpayers.
• Reduce contradictions: Minimize conflicting interpretations or varied legal opinions.
• Facilitate compliance: Help taxpayers clearly understand their obligations and comply confidently.
In essence, FTA-issued guidance now serves as an authoritative and final reference for interpreting tax laws.
What Is the Purpose of These New Tax Amendments?
The UAE’s new tax amendments, implemented by the Federal Tax Authority (FTA), aim to achieve several strategic goals that reinforce the country’s economic and regulatory environment:
1. Enhance the Efficiency of the Tax System
By establishing clear procedural timelines, the amendments accelerate processing of taxpayer requests and reduce administrative burdens for both taxpayers and the FTA.
2. Increase Transparency and Clarity
A more comprehensive legal framework—especially with binding FTA guidance—reduces ambiguity and strengthens voluntary compliance.
3. Protect the Rights of Both Taxpayers and the Government
The new rules balance taxpayer rights to claim credit balances (with clear timelines and transitional provisions) with the government’s right to conduct expanded tax audits when necessary.
4. Align With Global Best Practices
These reforms bring the UAE’s procedural tax framework closer to international standards, supporting its position as a reliable global financial and investment hub.
How Can I Ensure Compliance With the New Rules?
To ensure smooth and complete compliance with the new tax amendments taking effect in January 2026, businesses must take proactive, structured steps. Compliance requires more than knowledge of the law—it requires updating internal accounting procedures to align with the new timelines and enhanced audit requirements.
How HFA Firm Can Help Ensure Your Compliance
At HFA Firm, we understand the complexities that these amendments may introduce, especially regarding statute-of-limitations periods and credit balance recoveries. We offer a comprehensive set of services tailored to ensure your business remains fully compliant:
1. Full Tax Position Review
We conduct a thorough assessment of your current tax files, identify all outstanding and old credit balances (especially those eligible under transitional rules before 1 January 2026), and assist in submitting refund requests within the required deadlines.
2. Updating Policies and Internal Procedures
We upgrade your internal accounting systems to fully align with the new five-year refund period and ensure your records are audit-ready for any FTA review.
3. Legal and Tax Advisory Services
We provide clear, authoritative interpretations of the new FTA guidance and advise you on how these regulations apply to your business operations in the UAE.
Time Is Moving Quickly Don’t Delay Your Compliance
If your business aims to maximize the recovery of old credit balances and avoid potential penalties for non-compliance under the new rules,
contact the expert team at HFA Firm today to schedule a personalized consultation.
Let us help you transition confidently into the UAE’s new tax landscape.
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