Since VAT was introduced in the UAE in January 2018, many businesses have quietly built up excess input VAT credits — money the government technically owes them. Until now, there was no rush to claim it. That changed on 1 January 2026. A new five-year statutory deadline means that VAT credits from 2021 are already beginning to expire — permanently. This article explains exactly what is happening, who is at risk, and what you need to do before December 31, 2026.
Think your business may have unclaimed VAT refunds going back to 2021 or earlier?
Numex Consultancy Services offers a free 30-minute VAT Credit Audit — we identify exactly what you’re owed before the deadline expires.
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A Quick Story That Will Make This Very Real
Picture a UAE manufacturing company that has been importing raw materials since 2018. On every import, they pay 5% VAT. Because they sell most of their finished products overseas — zero-rated exports — they never actually owed the VAT they paid on imports. It was always recoverable.
Every quarter, they filed their VAT return, noted the excess input VAT, and carried it forward. For years, nothing happened. The balance sat there. Occasionally someone meant to file a refund claim, but with the pressure of running a business, it never became urgent enough. The credit was still there — it wasn’t going anywhere.
Until now. Under Federal Decree-Law No. 16 of 2025, effective 1 January 2026, the UAE government introduced a hard five-year deadline for claiming VAT refunds. Any VAT credit that arose more than five years ago — and has not been claimed — permanently expires. The business loses the money. No extension. No appeal on compassionate grounds. Gone.
For our manufacturing company, the VAT credits from early 2021 are already entering the danger zone. Credits from Q1 2021 may expire as early as the end of Q1 2026 — depending on the exact tax period. And for companies with credits going back to 2018, 2019, or 2020, those amounts expired before the new law came in — and the transitional window to rescue them runs only until 31 December 2026.
⚡ Numex Insight
At Numex Consultancy Services, we are seeing businesses with six-figure VAT credit balances they simply forgot to claim. In some cases, the amounts are significant enough to materially affect cash flow. The deadline is not a theoretical risk. For businesses that have been carrying forward credits, it is an immediate one.
First — What Is ‘Input VAT’ and Why Do Businesses Get Refunds?
Before we get into the deadlines, let’s make sure we’re all working from the same understanding. In the UAE, VAT is charged at 5% on most goods and services. When your business buys something — materials, equipment, services — you pay VAT on those purchases. This is called input VAT.
When your business sells something, you collect VAT from your customer and pay it to the FTA. This is called output VAT. Under the normal VAT system, your business pays the FTA the difference: output VAT minus input VAT. If you collected more than you paid, you owe the FTA. If you paid more in input VAT than you collected in output VAT — you have an excess, and the FTA owes you.
| Scenario | Example | What It Means for Your Cash |
| More output VAT than input VAT | You sold AED 500K goods; bought AED 200K materials | You pay the FTA (AED 25K – AED 10K = AED 15K) |
| More input VAT than output VAT | Exporter: sells zero-rated but buys materials with 5% VAT | The FTA owes you — you have a VAT credit |
| Zero-rated supplies business | Hotels, exporters, healthcare providers (partially) | Regularly accumulate VAT credits on their purchases |
| Capital expenditure spikes | Major equipment purchase in one quarter | Large input VAT credit arises — often not immediately claimed |
The most common situations where UAE businesses build up excess VAT credits are: exporters who sell at zero-rate but buy inputs at 5%, businesses that made large capital expenditure in a single period, companies with a high proportion of zero-rated or exempt supplies, and businesses that have been inconsistent about filing refund claims regularly.
💡 Who Needs to Read This Most
Exporters, manufacturers, hotel and hospitality groups, healthcare providers, education businesses, businesses that bought significant equipment between 2018 and 2022, and any company that has been filing VAT returns but carrying forward credits without claiming them — every one of these should check their VAT credit position right now.
The New Law: What Exactly Changed on 1 January 2026?
Federal Decree-Law No. 16 of 2025, issued by the UAE Ministry of Finance on 3 December 2025 and effective from 1 January 2026, introduced two structural changes to the UAE VAT refund framework:
Change 1: A Hard Five-Year Deadline for All VAT Refund Claims
Under the amended VAT Law, every VAT credit that a business holds must be either used to offset a VAT liability or formally claimed as a refund within five years of the end of the tax period in which it arose.
In simple terms: If you paid excess input VAT in, say, Q3 2021 (the tax period ending 30 September 2021), your five-year window to claim that credit expires on 30 September 2026. After that date, the credit is gone permanently. You cannot claim it, carry it forward, or offset it against future tax bills.
🚨 The Permanent Loss Rule
Under Federal Decree-Law No. 16 of 2025, Article on Refund Limitations: once the five-year period expires, the right to recover the VAT amount lapses permanently. These are not the FTA’s words — they are written into law. There is no discretion to extend the deadline in normal circumstances.
This rule now applies to all recoverable VAT — input VAT on purchases, VAT on zero-rated supplies, and VAT paid in connection with capital expenditure. Every credit, regardless of its original nature, now carries a fixed expiry date.
Change 2: A Special Transitional Window — Only Until 31 December 2026
The government recognised that introducing a strict five-year rule on 1 January 2026 could immediately wipe out credits that businesses had been legitimately carrying since 2018, 2019, and 2020 — credits that were still valid under the old, unlimited carry-forward rules.
So they created a transitional relief provision:
📅 The Transitional Window — Open Until 31 December 2026 ONLY
If your VAT credits either already expired before 1 January 2026, OR will expire within one year after 1 January 2026 (i.e., any time in 2026), you have a special grace period to submit your refund claim — but you must do so by 31 December 2026. After that date, the transitional window closes permanently.
This means: credits from 2018, 2019, 2020, and most of 2021 all fall inside the transitional window. If you are carrying forward unclaimed credits from any of these years, you have less than 9 months from today to rescue them.
Do you have unclaimed VAT credits going back to 2021 or earlier?
The transitional window closes 31 December 2026. After that, those credits are permanently gone. A Numex VAT credit review takes one session — and could recover thousands.
>> Book Your Free Compliance Health Check -> www.numex.ae
Which Years Are at Risk? A Clear Timeline
Here is a practical breakdown of the deadline situation for UAE VAT-registered businesses, assuming quarterly VAT filing periods:
| VAT Credit Period | Standard 5-Year Deadline | Status as at March 2026 | Action Required |
| 2018 (all quarters) | Expired in 2023 | Already expired — now in transitional window | File by 31 Dec 2026 or lose forever |
| 2019 (all quarters) | Expired in 2024 | Already expired — now in transitional window | File by 31 Dec 2026 or lose forever |
| 2020 (all quarters) | Expired in 2025 | Already expired — now in transitional window | File by 31 Dec 2026 or lose forever |
| Q1 2021 (ending Mar 31) | Expires 31 Mar 2026 | EXPIRING THIS QUARTER | Urgent — file immediately |
| Q2 2021 (ending Jun 30) | Expires 30 Jun 2026 | Expires in 3 months | File before June 30, 2026 |
| Q3 2021 (ending Sep 30) | Expires 30 Sep 2026 | Expires in 6 months | File before September 30, 2026 |
| Q4 2021 (ending Dec 31) | Expires 31 Dec 2026 | Expires end of year | File before December 31, 2026 |
| 2022 onwards | 5 years from period end | Not yet critical — but track carefully | Monitor and claim within windows |
Critical observation: Credits from Q1 2021 are expiring RIGHT NOW as you read this article. If your business had excess input VAT in the first quarter of 2021 and has not claimed it — you may have only weeks left to act.
⚠️ Monthly Filers — Additional Urgency
If your business files VAT returns monthly rather than quarterly, your 5-year windows expire on a monthly rolling basis. Monthly filers should immediately review credits from January, February, and March 2021 — all of which are either already expired or expiring imminently within the transitional window.
Why Do So Many UAE Businesses Have Unclaimed VAT Credits?
This is a fair question. If the FTA owed you money, why didn’t you claim it? The honest answer: there are several completely understandable reasons this happens in practice:
Reason 1: The Amount Felt Too Small to Bother
For many businesses, individual quarterly VAT credits are relatively modest — a few thousand dirhams. Filing a formal VAT refund claim requires preparing a submission, gathering supporting documentation, and waiting for the FTA to process it (which can take weeks). Many businesses quietly decided it was easier to carry the balance forward and ‘deal with it later.’ Later has now arrived.
Reason 2: The Credits Built Up During COVID-19 Operational Disruption
2020 and early 2021 saw many UAE businesses in survival mode. Finance and accounting teams were stretched. VAT refund claims were not a priority compared with keeping the business operational. As a result, credits from this period were often left on the EmaraTax portal and never claimed.
Reason 3: The Previous Law Allowed Indefinite Carry-Forward
Under the old UAE VAT framework, there was no deadline for claiming a VAT refund. Credits could sit on a business’s VAT account indefinitely — being carried forward period after period, technically still available for future offset. Many businesses, their accountants, and even some tax advisors operated on the assumption that these credits were safe. They weren’t wrong under the old law. But the old law no longer applies.
Reason 4: High Staff Turnover Means Institutional Memory Is Lost
Real example: A hospitality company changed its finance team in 2022. The new team took over the EmaraTax account, saw the credit balance, assumed it was recent, and continued to carry it forward. Nobody went back to check when the underlying credits actually arose — which was in 2019 and 2020.
This is one of the most common scenarios we encounter: a balance sitting in an account that nobody has traced back to its source.
Reason 5: Businesses Didn’t Know They Had a Refund Right
Some businesses — particularly those with predominantly zero-rated or exempt supplies — have paid input VAT on their overhead costs for years without realising those costs could generate a refund entitlement. A healthcare provider, for example, might carry input VAT on rent, utilities, equipment, and professional fees — much of which may be recoverable.
💡 Numex Tip
The FTA’s EmaraTax portal shows your current net VAT position, but it does not automatically flag which credits are approaching expiry or break them down by originating period. To properly assess your position, you need a period-by-period reconstruction of your VAT credit history — which is exactly what our team does as part of a VAT Credit Audit.
Has your finance team actually traced your VAT credits back to their originating period?
Most haven’t. Let Numex do a full period-by-period VAT credit review before September 2026. The earlier you start, the more time you have to build a clean refund submission.
>> Book Your Free Compliance Health Check -> www.numex.ae
How Does the VAT Refund Process Actually Work?
Many businesses have never filed a formal VAT refund claim and aren’t sure what’s involved. Here is a plain-language walk-through of the process:
Step 1: Identify and Quantify Your VAT Credit Balances
Log into EmaraTax, your FTA online portal. Your current net VAT position will show any credit balance. Then — and this is the critical step — trace that balance back to the specific tax period(s) in which each credit arose. This requires your historical VAT return data and reconciliation with your accounting records.
Step 2: Check Each Credit Against the 5-Year Timeline
For each credit balance, determine when the tax period ended. Count five years from that date. If that date is before 31 December 2026, you are inside the transitional window and must act. If the date is in 2021, 2022, or later — calculate your specific deadline.
Step 3: Prepare Your Refund Application and Supporting Documentation
A VAT refund claim on EmaraTax requires comprehensive supporting documentation. The FTA will not process a claim based on numbers alone. You need:
- 📄 All tax invoices supporting the input VAT claimed — from suppliers, landlords, service providers
- 📊 Reconciliation between your VAT returns and your accounting records — showing the credit arose correctly
- 📁 For large claims: additional documentation the FTA may request — bank statements, contracts, customs declarations
- ✅ For capital expenditure claims: asset registers and proof that the asset was used for taxable business purposes
Step 4: Submit Through EmaraTax
All refund applications are submitted through the FTA’s EmaraTax platform. Once submitted, the FTA typically processes straightforward claims within 20 business days. However, claims submitted close to expiry deadlines — particularly large claims with complex documentation — may attract a more detailed review.
🚨 The Late-Filing Audit Risk
Under the new rules, refund claims submitted close to the five-year deadline are explicitly flagged for closer FTA scrutiny. The FTA has extended audit powers for claims filed near expiry. This is not a reason to avoid claiming — but it is a reason to make sure your documentation is absolutely bulletproof before submitting.
Step 5: Respond to Any FTA Queries Promptly
The FTA may come back with questions or requests for additional information. Respond quickly and completely. Delays on your side can extend the processing time, and in some cases, an unresponsive claimant can lose the refund even when the underlying claim is valid.
Important: Not Every Input VAT Claim Will Be Approved
The new law also introduces stricter rules about which input VAT the FTA can refuse to refund. Even if your claim is within the five-year window, the FTA can deny recovery of input VAT where:
- 🚫 The supply was part of a tax evasion arrangement — and the taxpayer knew or should have known
- 🚫 The invoice relates to a supplier who did not pay the VAT to the FTA (making your claim part of what is sometimes called a ‘missing trader’ fraud chain)
- 🚫 The input VAT relates to expenses that are not for a legitimate business purpose — personal expenses, entertainment above the deductible threshold, or costs not related to taxable supplies
- 🚫 The documentation is incomplete or inconsistent — where invoices, contracts, and accounting records don’t line up
The last point is increasingly important. The FTA’s digital systems now cross-reference your VAT returns with other data sources — including supplier VAT registrations, Customs records, and even Corporate Tax filings. If your claim includes invoices from suppliers who were not VAT-registered at the time, or where the numbers don’t reconcile across your filings, expect questions.
💡 Do Your Due Diligence on Suppliers
Before filing a large refund claim, verify that all key suppliers were VAT-registered and in good standing with the FTA at the time of the invoices. The FTA’s public VAT register is available on their website. An input VAT claim on an invoice from an unregistered supplier is almost certain to be challenged.
Your 2026 VAT Refund Action Plan — 8 Steps to Take Right Now
If you have been reading this article with growing concern about your own VAT credit position, here is your immediate action plan:
- Log into EmaraTax and check your current VAT credit balance. Note the total amount and any net credit position shown on your account.
- Obtain your full VAT return history from 2018 onwards and reconstruct a period-by-period credit schedule — when did each credit arise, how much was it, has any portion been claimed already?
- Identify all credits from 2021 and earlier — these are either already in the transitional window (2018–2020) or have imminent expiry dates (2021 quarters).
- Prioritise Q1 and Q2 2021 credits immediately — credits from the tax period ending 31 March 2021 may already be at or past their standard 5-year deadline and inside the transitional window only.
- Assemble supporting documentation for your refund submissions — tax invoices, reconciliations, asset registers, contracts. Do not submit without complete documentation.
- Verify supplier VAT registrations for all significant input VAT claims — cross-reference against the FTA public register.
- Submit your refund application(s) on EmaraTax well before December 31, 2026 — ideally by September 2026 to allow time to respond to any FTA queries.
- Put a permanent VAT credit monitoring process in place going forward — review credits quarterly, claim within 12-18 months of arising, and never let balances age beyond 3 years.
The Bottom Line: The Money Is Still There — But Not for Long
The UAE government is not trying to trick businesses. The five-year VAT refund deadline and the one-year transitional window are stated clearly in Federal Decree-Law No. 16 of 2025. The transitional window specifically exists to give businesses a fair chance to rescue credits that arose under the old, unlimited carry-forward rules.
But fairness has a deadline. December 31, 2026 is fixed. After that date, every VAT credit that a business failed to claim through either the standard five-year window or the transitional provision is gone — permanently. The FTA will not accept late claims. There is no appeal mechanism for missed deadlines under the standard rules.
For UAE businesses, the action required is simple but urgent: find out what credits you have, trace them back to their originating period, and file your claims before the window closes. That’s it. The money is still there — but it won’t be for much longer.
✅ Our Promise at Numex
We help UAE businesses recover what they’re legitimately owed — before the deadline takes it away. Our VAT Credit Audit is a structured, documented review of your historical VAT position, identifying every recoverable credit and building a clean, FTA-ready refund submission. We’ve done this for manufacturers, exporters, hospitality groups, and healthcare providers. We can do it for you.
TAKE ACTION TODAY
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Tel: +971 55 840 6448 | Email: [email protected] | Web: www.numex.ae
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Legal References & Sources
– Federal Decree-Law No. 16 of 2025 — Amending the UAE VAT Law (effective 1 January 2026)
– Federal Decree-Law No. 17 of 2025 — Amending the UAE Tax Procedures Law (effective 1 January 2026)
– Federal Decree-Law No. 8 of 2017 — Original UAE Value Added Tax Law
– UAE Ministry of Finance — mof.gov.ae
– FTA EmaraTax Portal — tax.gov.ae
– Transitional Relief Provision — VAT credits expired before 1 Jan 2026 or expiring within one year thereof: claimable until 31 December 2026
(c) 2026 Numex Consultancy Services. This article is for informational purposes only and does not constitute formal legal or tax advice. For advice specific to your business, please consult a qualified UAE tax professional.
