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Old VAT credit balances in the UAE: the 5-year limit and the 31 December 2026 window

Old VAT credit balances in the UAE: the 5-year limit and the 31 December 2026 window

In short: since 1 January 2026, excess recoverable tax (your VAT credit balance) is carried forward for no more than five years from the end of the relevant tax period. If it is not refunded or used to settle tax liabilities within that time, the right to it lapses. For balances whose five-year period lapsed before 1 January 2026, or will lapse within one year from that date, a one-time transitional provision allows a refund request, or use of the balance against tax liabilities or administrative penalties, if the request is submitted within one year from 1 January 2026; on the cautious reading, by 31 December 2026. What to do now: check the balance and its tax periods in EmaraTax, reconcile it to your books, then file VAT311 or use the balance before the window closes.

The short answer

  • The general rule: a VAT credit balance does not stay open indefinitely. Article 74 of the VAT Decree-Law limits carry-forward to five years.
  • The transitional window: Article 3 of Federal Decree-Law No. 17 of 2025 lets taxpayers deal with balances whose period lapsed before 1 January 2026 or lapses within one year from that date, provided the request is submitted within one year from 1 January 2026.
  • What to do: identify the tax period behind each balance, reconcile it to your records, then claim a refund or use the balance in good time.

What counts as a VAT credit balance?

The Decree-Law uses the term “excess recoverable tax”. Article 74 describes two situations in which it arises.

Excess recoverable tax

This arises when recoverable input tax exceeds the output tax payable for the same tax period.

Overpayments

This arises when the tax paid to the Federal Tax Authority (FTA) exceeds the payable tax, in cases other than the one above.

What does the FTA do with the balance?

Under Article 74, the FTA offsets excess recoverable tax against payable tax or administrative penalties. If no refund request is made after the offset, the excess is carried forward to later tax periods. The FTA refund service card confirms that a refund request must be submitted for a refund to be made, and that excess payments can be kept as credit for later tax periods.

The new rule: five years, from 1 January 2026

Article 74 of the VAT Decree-Law was amended by Federal Decree-Law No. 16 of 2025, and Article 38 of the Tax Procedures Law by Federal Decree-Law No. 17 of 2025. Both amendments apply from 1 January 2026. A balance that is neither claimed nor used to settle liabilities within five years lapses and can no longer be used to settle any tax liabilities.

When does the five-year period start? The sources word it differently

The sources agree on five years, but they phrase the starting point in different ways:

Source Start of the five-year period, as worded
VAT Decree-Law, Article 74(3) End of the tax period in which the excess arose
Tax Procedures Law, Article 38(2) End of the tax period in which the excess payment was made (if the balance came from an excess payment); in which the tax return or voluntary disclosure was submitted or the tax assessment issued (if it came from one of these or from an FTA decision); or in which the balance arose (in other cases)
Ministry of Finance announcement (29 November 2025) End of the relevant tax period

This article does not decide which wording applies to a particular balance; that depends on how the balance arose and its facts. The safer approach is to identify the source of each balance and the tax period linked to it, and document both from your returns and records before working out any date.

Special cases

If a balance arises from an FTA decision after the five-year period has expired, or during its last 90 days, the refund application may be submitted within one year from the date the balance arises. In other cases where a balance arises at that point, the period is 90 days from the date it arises, under Article 38(3) and (4).

The transitional window to 31 December 2026

Who does it cover?

The transitional provision covers a taxpayer entitled to a refund of tax or a credit balance where the five-year period, counted from the end of the tax period referred to in Article 38(2), lapsed before 1 January 2026 or will lapse within one year from that date, under Article 3(1). The text does not name calendar years, so do not rely on year lists circulating online; check the tax period end date behind each balance in your EmaraTax account. If a balance’s period ends during 2026, the safer course is to submit before its original end date.

What are the two options?

You can apply for a refund of the balance, or use it to pay tax liabilities or administrative penalties. A cash refund is not the only route; for some businesses, using the balance against existing liabilities may be the better fit.

The deadline

The request must be submitted within a period not exceeding one year from the law’s effective date of 1 January 2026. The text gives no calendar date; the cautious reading is that the window closes on 31 December 2026. In practice, avoid leaving it to the final weeks: gathering documents and reconciling old periods can take time.

What happens after you submit?

Article 3 allows the FTA to conduct a tax audit or issue a tax assessment related to a refund application submitted within the window, within two years of its submission. The taxpayer may also submit a voluntary disclosure related to the application within two years of submitting it, unless the FTA has issued a decision. A clear reconciliation file supporting every figure in the claim is therefore worth keeping.

How to check your balance and act before the deadline

  1. Open your EmaraTax account and review the credit balance and the transaction history in the payments dashboard.
  2. Identify the source of each part of the balance and its tax period: excess input tax, an excess payment, or a return, voluntary disclosure or assessment.
  3. Reconcile the balance to your books: VAT returns, tax invoices, credit notes and payments. If records for older periods are incomplete, start with organising backlog accounts.
  4. Prepare the VAT311 documents: the output and input tax report, tax invoices and supporting documents. For extra payments: proof of payment and a bank IBAN letter.
  5. File VAT311 or use the balance against existing liabilities. A single VAT311 application can cover one or more tax periods.
  6. Keep the reconciliation file and documents, as the FTA may review the claim within two years of submission.

Common mistakes

  • Assuming the balance lasts indefinitely: after the amendments, it has a fixed life.
  • Confusing carry-forward with a refund request: carrying a balance forward does not replace a refund request if you want the money back.
  • Claiming without reconciling: the balance in your account needs support in your returns, invoices and books. A VAT turnover vs Corporate Tax revenue reconciliation helps, as does reviewing supplier verification before recovering input VAT.
  • Waiting until late December: preparing a file for old periods takes time, and the window will not repeat.

For other VAT changes this year, see UAE VAT Executive Regulation 2026 amendments.

Frequently asked questions

Does an unused UAE VAT credit balance expire?

Yes. Under Article 74 of the UAE VAT Decree-Law, as amended, excess recoverable tax is carried forward for no more than five years from the end of the tax period in which the excess arose. If no refund request is submitted and the balance is not used to settle tax liabilities before that period ends, the right to claim it lapses. Article 38(2) of the Tax Procedures Law words the starting point according to how the balance arose.

What is the 31 December 2026 transitional window?

It is a transitional provision in Article 3 of Federal Decree-Law No. 17 of 2025. A taxpayer whose five-year period lapsed before 1 January 2026, or will lapse within one year from that date, may apply to refund the credit balance or use it to pay tax liabilities or administrative penalties, provided the request is submitted within a period not exceeding one year from the law’s effective date of 1 January 2026.

Which tax periods does the window cover?

The window is not defined by calendar years. It is defined by a rule: has the five-year period, counted from the end of the relevant tax period, lapsed for that balance? The relevant tax period depends on how the balance arose, so check the tax period behind each balance in your EmaraTax account and reconcile it to your returns and books.

Can I use the balance to pay tax liabilities instead of a refund?

Yes. The transitional provision offers two options: apply for a refund of the balance, or use it to pay outstanding tax liabilities or administrative penalties, provided the request is made within the window. Article 74 also states that the Federal Tax Authority offsets excess recoverable tax against payable tax.

How do I claim a refund, and can one claim cover several periods?

VAT refunds are requested in EmaraTax through the VAT311 form, and the FTA service card lists the service as free. Required documents include the output and input tax report, tax invoices and supporting documents. The FTA FAQ confirms that one VAT311 application can cover one or more tax periods in which you were in a refundable position.

How long does the FTA take to process a refund?

According to the FTA service card, the estimated completion time is 25 business days from receipt of a complete application, and 55 working days from the date all requested information is provided where the request needs further review. These are the FTA’s published estimates, not a guarantee, so submitting early with complete documents is the practical approach.

Can the FTA review the claim after I submit it?

Yes. Article 3 of Federal Decree-Law No. 17 of 2025 allows the FTA to conduct a tax audit or issue a tax assessment related to a refund application submitted within the window, within two years of its submission. The taxpayer may also submit a related voluntary disclosure within two years, unless the FTA has already issued a decision.

Conclusion

A UAE VAT credit balance now has a five-year life, and the transitional window gives one opportunity to deal with balances whose period lapsed before 1 January 2026 or lapses within one year from that date, by refund or by using them against liabilities, until 31 December 2026 on the cautious reading. The right starting point is knowing the source and tax period of each balance and reconciling it to your records.

EQRAR’s VAT services work within the scope agreed with your business and include reconciling VAT data with accounting records and identifying missing data and documents. Our accounting and bookkeeping service offers organised bookkeeping, bank reconciliations and balance tracking for clearer business decisions.

Request a scoped review of your VAT credit balance against your books · WhatsApp/phone: +971 55 738 5159

Official sources:

This article is general information, not tax advice for a specific case.

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