For years, UAE businesses could let excess VAT sit on their FTA account and carry it forward indefinitely. That changed in 2026. A new five-year limit means some of that money now has an expiry date — and for the oldest credits, that date falls this year. Here is what changed, who it affects, and what to do before the window closes.
If your business has been carrying a VAT credit on its FTA account — input VAT you paid that was never refunded or fully used — 2026 is the year to look at it. A change to the VAT Law has put a clock on those credits, and for the oldest ones, that clock runs out this year.
Two amendments, issued in November 2025 and effective 1 January 2026, placed a five-year limit on excess VAT credits. Federal Decree-Law No. 16 of 2025 amended the VAT Law so that excess recoverable input tax can be carried forward for a maximum of five years from the end of the tax period in which it arose; Federal Decree-Law No. 17 of 2025 set a matching five-year deadline for refund requests in the Tax Procedures Law. In plain terms: a refundable VAT credit must be claimed back, or used to offset other tax, within five years — after that it expires, the money stays with the Federal Tax Authority, and it cannot be recovered.
This is a real shift. Under the old rules, a business could leave a credit balance sitting with the FTA for as long as it liked, carrying it forward year after year. Some businesses did exactly that — often deliberately, to keep a balance on account. That option is now gone. The credit has a shelf life.
Because VAT has been in place in the UAE since 2018, the oldest credits are now reaching the edge of that five-year window. The laws include a transitional rule for exactly this: where a credit's five-year period has already passed, or expires within a year of the new rules taking effect, the business gets a one-year window to claim it. In practice, that means credit balances from the 2018 to 2020 tax years must be claimed by 31 December 2026 — after which they are lost permanently. For a business that has quietly accumulated input VAT it never reclaimed, this is the difference between recovering that money and writing it off.
The businesses most exposed are the ones that naturally run input-heavy: exporters and zero-rated businesses, companies in a heavy investment or set-up phase, and free zone entities that built up large input credits early on and left them on account. If that sounds like your business, the credit balance is worth reviewing now rather than at year-end.
Pull your VAT position by tax period and look for credit balances you have been carrying forward without claiming. For each one, work out when its five-year window closes. Balances from 2018 to 2020 must be claimed by 31 December 2026; later credits expire on a rolling five-year basis after that. If any window closes this year, that credit needs to be claimed — or used to offset tax you owe — before the deadline, or it is gone. If you are not sure how to read your EmaraTax balances, that is exactly the kind of review we do.
The action is straightforward, even if the detail is not. First, identify what you are holding: a clear picture of your credit balances by tax period. Second, work out which are at risk in 2026. Third, claim them — through a VAT refund application, or by using the credit to offset a current liability — before the window closes. Doing this properly matters: refund claims have to reconcile to your records and be supported by valid invoices and proof of payment, or the FTA will query them and the clock keeps ticking while you sort it out.
There is also a wider context to be aware of. The same 2025 amendments expanded the FTA's audit powers — and notably, where a refund is claimed in the fifth and final year of its window, the FTA gains up to two further years to audit that specific claim. Filing a clean, well-documented refund claim is not just about getting your money back; it is about not inviting a prolonged review while you do it. This is where having the claim prepared correctly the first time pays off.
At SKM International, we review your VAT position, identify any credits at risk under the new five-year rule, and prepare and file the refund claim — with the documentation the FTA expects — so nothing expires unclaimed. We also clear anything that could block a refund first, such as outstanding penalties, which can be offset against the amount you are owed. If you have been carrying a VAT credit and have not looked at it since the early years of VAT, this is the year to act.
You can read more about how the refund process works on our VAT Refund service page, or about ongoing filing on our VAT Return Filing page. If you would simply like us to check your position, get in touch — it is a quick review and the downside of leaving it is permanent.
This article reflects the UAE position as at 2026, following amendments to the VAT Law effective 1 January 2026. The exact treatment of older credits depends on the tax period involved and your specific circumstances, and the rules may be subject to FTA guidance and clarification. Confirm your position with the Federal Tax Authority or with us before acting. This article is general information, not tax advice for a specific situation.
A quick review tells you what you are holding, what is at risk in 2026, and what can be reclaimed. The downside of waiting is permanent.
From 1 January 2026, under Federal Decree-Law No. 16 of 2025 (VAT Law) and No. 17 of 2025 (Tax Procedures Law), excess VAT credits must be claimed back or used to offset other tax within five years of the end of the tax period in which they arose. After five years the credit expires and can no longer be recovered. This replaced the previous position, where credits could be carried forward indefinitely.
VAT has applied in the UAE since 2018, so the earliest credits are now reaching the end of the five-year window. Under the transitional rule, credit balances from the 2018 to 2020 tax years must be claimed by 31 December 2026, after which they are lost. If you have been carrying credits forward from the early years of VAT without claiming them, this is the year they are most at risk.
Review your VAT position by tax period and look for credit balances you have carried forward rather than claimed. For each, work out when its five-year window closes; any closing in 2026 needs action before the deadline. If you are not sure how to read your EmaraTax balances, we can review them for you and tell you exactly what is at stake.
Yes — provided you act within the window. You can recover a credit by claiming a VAT refund or by using it to offset a current tax liability. The claim must reconcile to your records and be properly supported, or it can be delayed or queried. Our VAT Refund service handles the review, documentation and filing so the claim is made cleanly and in time.
The 2026 changes were part of a broader update across the UAE tax system that also expanded the FTA's audit powers and tightened procedural deadlines, affecting both VAT and Corporate Tax. The five-year credit limit itself is most immediately relevant to VAT, but the wider message is the same: the FTA has moved firmly into enforcement, and clean, timely compliance matters more than ever.
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