- Excess input VAT can be carried forward for five years from the end of the tax period in which it arose, and expired credits cannot be used, offset or refunded.
- The refund application window is also five years from the end of the relevant tax period, a separate clock from the carry-forward limit.
- Rights that expired, or expire within a year of 1 January 2026, are reported to be claimable up to 31 December 2026; filing the request by that date is what counts.
- The FTA can deny input tax where a taxpayer knew, or ought to have known, a supply was linked to tax evasion, so keep records of supplier checks.
From 1 January 2026, UAE VAT credits and refunds run on a clock: excess input VAT can be carried forward for five years from the end of the tax period in which it arose, and after that it can no longer be used, offset or refunded.
Businesses holding old VAT credit balances have a narrow transitional window, reported as ending on 31 December 2026, to put refund claims on file before those rights lapse for good.
Federal Decree-Laws No. 16 and No. 17 of 2025 amended the VAT Law, the Excise Tax Law and the Tax Procedures Law, and a Cabinet Decision in March 2026 followed with changes to the Tax Procedures executive regulation. This guide stays on one question: how long a VAT credit stays alive, what happens when it expires, and where the Federal Tax Authority can now push back on input VAT.
| Detail | What applies |
|---|---|
| Legislation | Federal Decree-Laws No. 16 and No. 17 of 2025, effective 1 January 2026 |
| Credit carry-forward limit | Five years from the end of the tax period in which the excess input tax arose |
| Refund application window | Five years from the end of the relevant tax period |
| Transitional relief | Rights that have expired or expire within one year of 1 January 2026 can be claimed up to 31 December 2026 |
| Input tax denial | Possible where the taxpayer knew, or ought to have known, a supply was linked to tax evasion |
| Executive regulation update | Cabinet Decision No. 17 of 2026, effective 1 April 2026 |
“A VAT credit is no longer an open-ended asset on the balance sheet. It has a five-year shelf life, and the clock starts when the tax period ends, not when the business notices the balance.”
What changed on 1 January 2026
Before 2026, businesses in the UAE could generally carry a recoverable VAT balance forward without a fixed expiry, and the limitation rules sat in a separate provision of the VAT Law. The 2025 decree-laws replaced that arrangement with a uniform five-year limit that now runs across VAT, excise and the administrative provisions of the Tax Procedures Law. Law-firm summaries from KPMG, PwC and Andersen describe the same core change, and all give 1 January 2026 as the effective date.
In practical terms, two separate five-year rules now sit side by side. The first governs how long excess input tax can sit on your VAT account as a credit. The second governs how long you have to file a refund application for a balance that exists. They share a start point, the end of the relevant tax period, but they are not the same clock, and a business that is careful about one can still be caught by the other.
See our guide on the Cabinet Decision No. 149 changes to the VAT executive regulation for the separate 1 October 2026 changes to input tax apportionment, which this article does not repeat.
How the five-year clock is counted
The clock starts at the end of the tax period in which the credit arose, not on the filing date and not on the date the FTA acknowledges the balance. For a quarterly filer whose excess input tax arose in the quarter ending 31 March 2023, the five years run to 31 March 2028. Published commentary uses calendar-quarter examples of this kind, so the practical rule is to date every credit by its tax period end.
Once five years have passed, the summaries we reviewed describe the right as extinguished: the credit cannot be used against output tax, cannot be offset against other taxes, and cannot be refunded. Nothing in them suggests a discretion to revive an expired balance outside the transitional rules.
Consider a hypothetical trading company that bought a large stock of equipment in early 2022 and recorded a VAT credit of AED 180,000 in the quarter ending 31 March 2022. Management planned to offset it gradually against future output tax, but sales stayed low and a balance remained.
Under the transitional rule, the company would need to file its refund request by 31 December 2026 rather than waiting. If it had instead expected to use the credit “eventually,” the unused part would lapse. The figures are invented purely to show how a tax period end drives the deadline.
The transitional window for old credits
The amended Tax Procedures Law includes a transitional provision for taxpayers whose refund rights have already expired, or will expire within one year of 1 January 2026. KPMG’s summary gives the claim deadline as 31 December 2026, and Andersen’s alert describes it as a request that must be made before 1 January 2027. Those two readings land on the same practical date.
Secondary commentary reads this as covering credits that arose in 2018 to 2020, with 2021 credits expiring period by period through 2026. We could not tie that year-by-year breakdown to the decree-law text itself, so treat it as a working interpretation. One point reported consistently is that filing the request by the date is what counts, and the refund does not have to be processed or paid by then.
The same transitional article is reported to give two years to submit a voluntary disclosure for a refund beyond the usual five years, and a two-year audit window for credits claimed outside the limit. Because those mechanics are summarised differently across sources, confirm them against the published text before relying on them.
See our guide on how the first Corporate Tax filing wave played out for a sense of how the FTA has handled other deadline-driven rules.
Refund applications and the audit tail
The amended Tax Procedures Law sets the same five-year window for filing a refund application, measured from the end of the relevant tax period. It also deals with credits that arise late. Summaries describe a one-year window where a credit arises from an FTA decision after the five years have run, or within the final 90 days, and a 90-day window for other late-arising credits. These are narrow safety valves, not a general extension.
A refund claim has an audit consequence. Where a claim is filed in the fifth year, the summaries describe a two-year audit window for the FTA to review it, which sits on top of the general five-year audit limitation. The sensible reading is that claiming late in the window keeps your records open for longer.
The April 2026 amendments to the executive regulation reinforce that point. Cabinet Decision No. 17 of 2026, announced by the Ministry of Finance and effective 1 April 2026, extends the period for keeping books and supporting documents by two years for tax periods tied to a refund application the FTA has not yet decided. See our guide on what late filing and late registration actually cost for the penalty side, which sits separately from refund time limits.
Input tax denial and the “knew or should have known” test
The amended VAT Law adds provisions on recovering input tax in tax evasion chains. The FTA can disallow input tax where a supply is linked to tax evasion and the taxpayer was aware of it. It can also disallow where the taxpayer ought to have been aware based on the circumstances, and awareness is described as including a failure to verify the validity or integrity of the supplies received.
This goes beyond a refund-timing rule, and it affects purchasing practice. A buyer who never checks that a supplier is registered, that its invoices are valid or that its pricing makes commercial sense is more exposed than one who keeps a record of basic checks. The decree-law summaries do not set out a checklist, and the FTA was reported to have power to issue practical guidelines under a new provision. We could not confirm that those guidelines had been published at the time of writing.
See our guide on the e-invoicing mandate and FTA e-billing deadlines for the invoice data that will make supplier verification easier to evidence once structured invoicing is live.
Reverse charge and the end of self-invoicing
A smaller but practical change removes the requirement for a taxpayer to issue a tax invoice to itself when accounting under the reverse charge, for example when importing services from abroad for business use. KPMG’s summary places this in Article 48 of the VAT Law. The reverse charge itself is not removed. The business still declares output tax and, where entitled, recovers the matching input tax, so the net effect on a fully taxable business is nil.
The saving is administrative, because accounting systems no longer have to generate an invoice that exists only to satisfy the rule. The risk is documentation: with no self-invoice, the supporting file shifts to the supplier’s invoice, the contract and the calculation behind the return. Treat those papers as the evidence for both the output and the input side.
See our guide on VAT deregistration and the penalty for missing it if your business is winding down, because a closing business needs to settle credit balances before it leaves the VAT system.
A year-end credit review plan
Because the transitional date falls in late December, the practical plan starts now. Pull the VAT account by tax period, list every period that shows an unrecovered credit, and write the five-year expiry date next to each. Anything that expired or expires in 2026 deserves a decision this quarter: file a refund request, or accept that the credit may be lost.
Then separate credits you expect to use against output tax from those you want refunded. A credit that will realistically never be used against sales is better claimed than carried. Note too that a refund request opens a review window and extends record retention, so line up the invoices, import documents and reverse charge workings before you file.
See our guide on when a small business actually needs to register for VAT if you are unsure whether your own turnover keeps you inside the VAT system long enough for a credit to matter.
What remains unclear
Several points should be checked against the official text and FTA guidance rather than assumed. The exact article wording of the transitional provision, the treatment of credits from 2021, and the interaction between the voluntary disclosure route and the refund clock are all described slightly differently by different advisers. Secondary blogs also differ on whether certain examples run to the end of a calendar year or the end of a tax period, and the period-end reading is the one supported by the law-firm summaries.
Nor have we seen published FTA examples showing how the “ought to have been aware” test will be applied in a real audit. Until the FTA issues guidance or case practice emerges, treat the test as a reason to document supplier checks rather than as a settled standard.
Common mistakes when approaching the VAT five-year limit
- Dating a credit by the filing date instead of the end of the tax period in which it arose.
- Assuming a transitional claim must be paid out by 31 December 2026, when the reported rule is that the request has to be submitted by then.
- Leaving a refund claim to the fifth year without planning for the longer audit window and the extra two years of record keeping.
- Accepting supplier invoices without any record of checks, which weakens the position if input tax is challenged.
When professional help is worth it
A review is most useful where the credit balance is large, spans several years, or sits alongside supplier relationships that could attract attention. A tax adviser can map each tax period to its expiry, prepare the refund file and judge whether a voluntary disclosure is also needed. For small balances with clean records, an internal review against the VAT account may be enough.
The e.zone team that handles VAT registrations and returns can help lay out a credit schedule and organise supporting records. See e.zone’s guide on registering for VAT as a UAE business for the basics of the system these credits sit inside.
This article is general information, not tax advice. Rules and practice are still developing, so check the current legislation and FTA guidance for your own position before filing.
Frequently asked questions
How long can UAE VAT credits be carried forward from 2026?
Under the 2025 decree-laws effective 1 January 2026, excess input tax can be carried forward for five years from the end of the tax period in which it arose. After that it cannot be used, offset or refunded.
What is the deadline for old VAT credits?
A transitional provision is reported to let taxpayers whose refund rights have expired, or expire within one year of 1 January 2026, claim up to 31 December 2026. The request has to be filed by then, and the refund does not have to be paid by that date. Confirm the exact wording against the official text.
When does the five-year clock start?
At the end of the tax period in which the credit arose, not on the filing date or the date the FTA acknowledges the balance.
Can the FTA deny input VAT?
Yes, where a supply is linked to tax evasion and the taxpayer knew, or ought to have known, of it. Awareness is described as including a failure to verify the validity or integrity of supplies. We could not confirm that FTA guidance on applying this test had been published.
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