What Are the Key Changes in Federal Decree-Law No. 17 of 2025 and UAE Tax Procedures Law?

The recent Federal Decree-Law No. 17 of 2025 brings some major changes to the UAE Tax Procedures Law (Federal Decree-Law No. 28 of 2022) as a part of the overall plan of the UAE to modernize its taxation system, improve its clarity and transparency, and meet the requirements of the international standards. These reforms, which will apply as of 1 January 2026, affect the functionality of refunds, disclosures, audits and procedures obligations under VAT, excise tax and corporate tax regimes.

Intent and Rationale of the Amendments.

The amendments are aimed at:

Create more definite statutory limitation periods in relation to tax refunds and credit balances.
Optimize voluntary disclosure regulations to minimize irrelevant compliance costs.
Increase the capabilities and the process of protection of the federal tax authority (FTA).
Enhance uniformity and foreseeability in processes of taxation on companies that conduct business within the UAE.

Predetermined Refund and Credit Balance Periods.

Among the most important modifications offered by Federal Decree-Law No. 17 of 2025, the establishment of a five-year deadline on refund claims or the usage of credit balances to settle the tax payments should be mentioned. Under the amended law:

The taxpayers are required to submit a request of the refund of credit balance within the next five years after the close of the period concerned.
In case the time period is expired, the right to receive a refund or use a credit balance will be lost.
Transitional provisions give taxpayers who had older balances of credits up to 1 January 2026 to file claims within a period of one year; without losing legitimate entitlements to immediate effect because of the new rule.
This time frame is more structured and predictable to both tax payers and authorities unlike the former where there was no distinct limit on claims to be made on the refund.

Flexibility of Voluntary Disclosure.

The amendments tighten the requirements of voluntary disclosure (VD). Key changes include:
Voluntary disclosure is now limited to either errors or omissions that are outlined by the FTA and that have a material effect on the tax payable or refundable.
The corrections of the errors that do not influence the amount of tax payable can be made directly in the tax return and not by a formal voluntary disclosure.
The FTA can also provide additional guidelines about the cases that need to be disclosed and the ones that can be fixed by simply making regular adjustments.
The solution minimizes unwarranted compliance processes of immaterial mistakes, and retains FTA supervision where it counts.

Rules on Audit, Assessment and Limitation Period

Following the amended Tax Procedures Law:

In certain instances, the FTA has the power to carry out tax audits or make an assessment beyond the normal period of time when a refund request is imposed but within the statutory scope like when a refund request is late but within the statutory limits.
Another enhancement effected by the law is that it presents official and binding guidelines that are provided by the FTA and that are supposed to harmonize the understanding and minimize the discrepancy in tax execution.
Transitional provisions give longer deadlines to taxpayers whose right to refund is due by or around the effective date balancing the legal certainty with the practicality of complying.

What is the impact of the five-year refund window and tax credit regulations on UAE Tax refund and disclosure?

Five-Year window refund introduction

The five-year refund window in the creation of the tax environment of businesses and individuals in the UAE is fundamentally changed. In the past, the statutory deadline to claim the refund or credit balance has not been clearly defined, which left the possibility of uncertainty and disagreement on the stale claims.

With the new rule:

Input tax credit balances should be used or refunded in five years of the period when the credit accrued.
Missing this deadline may lead to loss of the right to a refund and it is therefore very important that the taxpayers keep a check and balance on their balance.

Effects of the UAE on the Tax Refund Deadlines

The rule harmonizes periods under VAT and other taxes subordinated to the Tax Procedures Law to eliminate previous inconsistent or unclear practices. Transitional clauses reduce the loss of entitlements immediately by providing more grace periods under specified conditions.

Tax Reimbursement Regulations and adherence.

The UAE emphasises on the timely planning and compliance of taxes by restricting the use of credit balance to a period of five years. Businesses must:

Follow-up open credit balances since the beginning of the period covered in the tax return.
Make sure that claims of refunds or liability settlements are made within the stipulated time.
Have effective records to back up refund requests, especially where credit balances are associated with previous tax years.

The shift also promotes operational discipline, and aligns the global standards on limit periods with the practices on refunds.

Voluntary Disclosure and Error Management.

The updated voluntary disclosure system gives the tax payers an opportunity to rectify some of their mistakes with the help of routine filings where necessary and minimise the administrative burden and improve efficiency.
In the case of material errors, the VD requirements described by the FTA maintain the integrity without providing any ambiguity regarding the remediation route.
The internal reporting protocols should be reviewed by taxpayers to make sure that the correction of errors will be made according to the new requirements and they will not face unintentional penalties due to late or incorrect disclosure.

What Is New in the VAT, Excise, and Corporate Tax Penalties in the UAE?

Summary of the Cabinet Decision No. 129 of 2025.

To ensure the procedural transformations, the Cabinet of the UAE adopted Cabinet Decision No. 129 of 2025 which proposes a single set of penalties regarding VAT, excise tax, corporate tax and the Tax Procedures Law.

These amendments, which will be effective on 14 April 2026, seek to harmonize penalties, make compliance easier and voluntary compliance to reporting obligations.

Facilities Unity: Objectives of Unified Penalty Regimes.

Simplicity and Predictability: The new framework substitutes complicated collection of compound penalties with more straightforward and generally lower set quantity of penalties on widespread violations.
Consistency in cross taxation: The definitions and penalty criterion are consistent between VAT, excise tax and corporate tax, so that similar compliance challenges are treated similarly.
Voluntary compliance: The taxpayers are more informed on penalties and this encourages them to comply proactively.

Key Penalty Updates

Examples of new penalty regime are:

Late Payment Penalty: The introduction of a flat annualised 14% penalty on outstanding tax due, to be paid every month, in place of the former tiered penalty in the form of an interest-like penalty.
Less Administrative Sanctions: The size of penalties imposed on common violation of not filing information in Arabic or updating tax documentation is reduced substantially, and preliminary compliance is more possible.
Harmonised Definitions: Tax-related terms like tax audit, tax difference and due tax are harmonised across tax codes, to the extent that they are uniformly enforced.
Legal Representative and Tax Agent Liability: The new framework further defines and in other instances broadens the liability on representatives and tax agents on breach of compliance.

Interaction with the Cabinet Decision No. 75 of 2023.

The new regime is the continuation of the previous changes introduced by the Cabinet Decision No. 75 of 2023 with the improved standards of calculating penalties and definitions, which will result in the development of consistent standards of their enforcement in all taxes.

What is the impact of DMTT, OECD Pillar Two and UAE VAT Law Amendments on Multinational Groups?

OECD Pillar Two and Domestic Minimum Top-Up Tax (DMTT).

As described in the international requirements of the OECD Pillar Two/GloBE regulations, the UAE now has a Domestic Minimum Top-Up Tax (DMTT) in place to make sure that the large multinational enterprises (MNEs) have an effective tax rate of 15 percent on profits. This is applicable to MNEs whose consolidated revenues are at or above EUR 750 million and foreign operations, which makes the UAE tax policy consistent with the international anti-base erosion regimes.

The main factors that have impact on multinational groups are:

15% Minimum Tax: The minimum tax in the UAE will apply to groups that have an effective tax below 15%.
Scope and Threshold: The threshold corresponds to GloBE rules, i.e. big international businesses with significant economic presence.
Integration with UAE Corporate Tax: The DMTT is functioning in parallel with the current corporate tax framework, which has to be coordinated to make global tax-planning work.

Impact of VAT Law Amendments (2026)

The amendments to the 2026 VAT Law (Federal Decree-Law No. 16 of 2025) change the procedures and are relevant to the multinational groups, such as:

Reverse charge simplification: Under the reverse charge, taxpayers do not have to issue tax invoices by themselves, but rather keep all the relevant documents.

Five-year refund cap: In line with procedural law reforms, VAT refund claims are also limited under a five-year deadline after reconciliation, which makes claims more urgent.

Input VAT deduction terms: The FTA can reject conditions of input VAT deductions in the event of the underlying transactions being connected to tax evasion, and due diligence on supplier and transaction vetting.

Compliance and Administrative Simplifications.

Other VAT administrative changes are aimed at making businesses easier to comply with, such as the provision of more understandable documents, and providing the possibility to correct the error without influencing the amount of paid VAT.

Conclusion

The Federal Decree-Law No. 17 of 2025 of the UAE, together with associated changes such as Cabinet Decision No. 129 of 2025, will be a significant restructuring of the tax procedural framework in the UAE.

Introduction of a five year refund regime, streamlined voluntary disclosure regulations, standardized penalty regimes, harmonization with the OECD Pillar Two minimum tax standards, increases transparency, predictability as well as global compliance with domestic and multinational taxpayers alike.

In order to ensure that they are still compliant and that they can take advantage of these reforms, businesses ought to revise internal policies and systems so that they are ready to roll-out in phases in the year 2026.