Maximize Your VAT Recovery: Final Deadline for Historical Refunds

Background

Pursuant to the amendments introduced under Federal Decree-Law No. 8 of 2017 on Value Added Tax and Federal Decree-Law No. 28 of 2022 on Tax Procedures, significant changes have been made to the rules governing the recovery of excess VAT in UAE. Businesses navigating UAE VAT law must now pay close attention to revised timelines that determine whether their refund entitlements remain valid or permanently lapse.

Under the amended VAT provisions, a taxable person may carry forward excess input tax and recover the same by submitting a VAT refund application within five years from the date on which the entitlement to the refund arose. If the refund application is not submitted within the prescribed period, the excess VAT credit will lapse and may no longer be used to offset future VAT liabilities or be claimed as a refund.

Further, under the Tax Procedures Law, VAT refund applications are generally required to be submitted within five years from the end of the relevant tax period. However, certain exceptions apply:

• Where the refundable amount arises due to a decision issued by the tax authority, the taxpayer may submit the refund claim within one year from the date of such decision.
• In certain other circumstances, a 90-day filing period may apply depending on the nature of the claim.
• As part of the transitional relief introduced by the amendment, taxable persons whose refund periods had already expired are granted an additional opportunity to submit VAT refund applications until 31 December 2026.

For a better understanding, different scenarios may be considered and the relevant provisions analysed in detail.

Scenario 1

Let us consider an airline company in the UAE that has been registered for VAT since 2018. Since the company’s operations mainly involve international air transportation and related services, most of its supplies qualify for zero-rating under the provisions relating to international transportation of passengers.

However, the company procures various goods and services from local suppliers and service providers within the UAE, who charge VAT at 5%. Consequently, the company has consistently accumulated excess input VAT and has remained in a refund position since 2018. Despite this, the company has not submitted any VAT refund applications to date.

Analysis

Under the amended provisions, the company is eligible to recover excess VAT in UAE by filing refund applications within five years from the end of the relevant tax period.

The company has refundable VAT balances outstanding since 2018. Refund claims relating to the period from 2018 to 2020 may be submitted up to 31 December 2026, as the Authority has provided relief extending the deadline for VAT filing in UAE for those periods.

However, refund claims relating to the tax period ending April 2021 have already lapsed, as the last date for submission of the refund application was April 2026.

Take away: The amendment grants taxable persons with expired or expiring refund periods a final opportunity to recover eligible VAT credits. Failure to submit refund claims within the prescribed extended timeline will result in the permanent lapse of the recoverable VAT balance.

The eligibility timeline can be understood as summarised in the example below:

Scenario 2

AB FZC is located in the designated free zone of Jebel Ali Free Zone and is engaged in the import and export of engineering equipment. Since the company operates within a designated zone, a significant portion of its transactions are treated as out-of-scope supplies for VAT purposes.

At the same time, the company incurs VAT on local purchases and local services procured within the UAE, resulting in excess input VAT and a refund position in its VAT returns. The VAT refund amount relating to the period from February 2022 to January 2023 amounts to AED 1 million.

Analysis

As the refund entitlement relates to periods after 2021, the standard five-year limitation period under UAE VAT law will apply. Accordingly, the deadlines applicable under UAE VAT law for submitting refund applications are as follows:

Take away: Since the relevant tax periods fall after the transitional relief window, AB FZC must submit the refund applications within the normal five-year statutory period. Any delay beyond the applicable deadlines may result in the loss of the company’s right to recover the excess VAT.

Scenario 3

XYZ Trading LLC is a Dubai-based trading company which purchases goods locally and exports to various MENA region countries. During the tax period from January 2025 to December 2025, the company incurred significant input VAT from local purchases and operational expenses, resulting in an excess recoverable VAT balance of AED 750,000.

The company intends to apply for a VAT refund instead of carrying forward the excess input tax.

Analysis

Since the refund entitlement relates to the 2025 tax periods, the standard five-year limitation period under the amended VAT provisions will apply. Accordingly, the company must submit the VAT refund applications within five years from the end of each relevant tax period.

The applicable deadlines are illustrated below:

Take away: For tax periods relating to 2025 onwards, taxpayers are required to strictly comply with the standard five-year limitation period prescribed under the VAT legislation. Therefore, XYZ Trading LLC must ensure that the VAT refund applications are submitted within the applicable deadlines to preserve its entitlement to recover the excess VAT balance.

Conclusion

Under the recent amendments to the UAE VAT Executive Regulations and Tax Procedural Law, the window to reclaim eligible VAT in UAE has been significantly clarified. While the standard limitation period is five years from the end of the tax period, a critical transitional grace period is currently in effect. After this date, any unclaimed VAT for these years will effectively lapse. This is the ultimate opportunity for companies in JAFZA, mainland Dubai, and across the UAE to recover historical overpayments.

Expert Support for Complex Compliance

Navigating Federal Tax Authority (FTA) requirements requires precision, especially for high-stakes sectors like Logistics, Manufacturing, Real Estate, Exports, Education and Healthcare. To ensure your applications are successful and fully compliant, CLA Emirates - among the leading VAT consultants in UAE - provides specialised end-to-end support:

• Certified Tax Agent Guidance: Our FTA-certified Tax Agents handle the technical intricacies of the refund process, minimizing the risk of rejection or audits.

• Strategic Compliance Reviews: We conduct deep-dive health checks to regularize historical VAT positions and ensure all documentation meets the latest regulatory standards under UAE VAT law.

• JAFZA & Free Zone Expertise: We provide tailored solutions for companies operating within JAFZA, Dubai South, DMCC and other specialized zones, managing the unique VAT treatments associated with free zone operations.

• Refund Application Management: From 2021 onwards, the five-year rule applies strictly. As experienced VAT consultants in UAE, we help establish robust internal systems to ensure timely VAT filing in UAE and refund claims in the future.

Safeguard Your Entitlements

Don’t let eligible capital remain locked with the tax authorities. Whether you are a leading industrial player or a growing Dubai-based enterprise, our VAT consultants ensure your timely VAT filing in UAE and maximised recovery of input while maintaining total tax compliance.

Act now to review your historical tax periods before the 2026 deadline. Reach out to the CLA Emirates team today to secure your refund and fortify your VAT position in UAE.