The United Arab Emirates (UAE) continues its progressive journey toward fiscal modernization with the issuance of Federal Decree-Law No. 17 of 2025, signed on 1 October 2025 and set to take effect from 1 January 2026. This new amendment represents a significant development within the UAE’s Tax Procedures Law, originally established under Federal Decree-Law No. 28 of 2022, and subsequently amended through Federal Decree-Law No. 17 of 2024.
Major Amendments Introduced by Federal Decree-Law No. 17 of 2025
Unified Framework for Tax Allocation and Refunds
A major amendment establishes a precise timeframe for dealing with credit balances and overpaid taxes. Both the Federal Tax Authority (FTA) and the taxpayer are now bound by this limit, enhancing financial certainty.
- Five Year Limit: The amendments set a maximum period of five (5) years from the end of the relevant tax period for a taxpayer to request a refund of a credit balance from the FTA or to use that balance to settle tax liabilities.
- where a credit balance results from a decision issued by the Authority either after the expiry of the five-year period or within the final ninety days of that period, the taxpayer is allowed to submit a refund application within one year from the date on which such credit balance arises.
- Without prejudice to the above, if a credit balance arises in any other circumstance after the expiry of the five-year period or during its last ninety days, the taxpayer may file the refund application within ninety days from the date the balance arises
Additionally, where a taxpayer has overpaid or holds a credit balance, the FTA may use that balance to offset other tax liabilities or penalties within five years from the end of the relevant tax period.
Refined Statute of Limitation Rules
Federal Decree-Law No. 17 of 2025 extensively rewrites Article 46, setting out time limits for tax audits and tax assessments:
- Standard Period: The FTA may not audit or assess a taxpayer after five years from the end of the tax period.
- If a taxpayer is notified of an audit before expiry, the FTA now has four additional years to complete it.
- If it relates to a voluntary disclosure submitted in the fifth year, provided the process is concluded within one year from the date of submission of VD.
- If it pertains to a refund application related to tax or credit balance submitted in the fifth year or during the additional specified period, provided the process is concluded within two years from the date of submission of refund application.
- Tax Evasion or registration failures allow assessments up to fifteen years after the relevant period.
- Tax Evasion or registration failures allow assessments up to fifteen years after the relevant period.
Note: No Voluntary Disclosure may be submitted after the expiry of five years from the end of the relevant Tax Period.
However, an exception applies where the Voluntary Disclosure relates to a refund application that was previously submitted with an incorrect amount, resulting in a refund higher than what the taxpayer was entitled to, and the Authority has not yet issued a decision on that application.
Clarified Rules on Voluntary Disclosure
The voluntary disclosure (VD) mechanism has been fine-tuned to promote early self-correction while reducing unnecessary penalties:
Mandatory VD | When an error results in underpayment or an excessive refund, taxpayers must disclose it. |
Optional VD | When an error results in overpayment or understated refund, taxpayers may disclose. |
No-Difference VD | Even if the tax payable remains unchanged, corrections must be made by submitting a VD or via a Tax Return. |
Introduction of Official and Binding Directions
To facilitate practical implementation, unify interpretation, and reduce risks arising from inconsistencies, the law grants the FTA a new, significant power to provide clear guidance.
The FTA is now empowered to issue official and binding directions to both taxpayers and the Authority itself regarding the application of tax legislation to tax transactions without prejudice to the provisions of applicable tax laws.
Transitional Provisions for Pre-Existing Credits
To ensure tax fairness and address outstanding balances from previous periods, the decree-law includes specific transitional rules.
- One-Year Grace Period: Taxpayers with credit balances whose related five-year period expired before January 1, 2026, are enabled to submit their refund requests within one year from January 1, 2026.
- Voluntary Disclosure: Furthermore, where a refund application is filed within the above transitional year and later found to contain an error, a voluntary disclosure may be submitted within two years from the date of filing that refund request, provided the FTA has not yet issued a decision on it.
Conclusion
The amendments introduced by Federal Decree-Law No. (17) of 2025 are a meaningful step toward creating a more structured, predictable, and internationally aligned tax environment in the UAE. Businesses are strongly advised to review their financial records immediately, especially regarding any outstanding credit balances, to ensure timely compliance before the January 1, 2026, effective date.
Stay ahead of the change.
Team of Experts at RVG can help you review your compliance procedures before the new law takes effect on 1 January 2026.
📩 Connect with RVG today to ensure a smooth transition.
