Businesses in the UAE often accumulate excess input VAT due to capital expenditures, zero-rated supplies, exports, FTA credits, excess cash deposits, or timing differences between input and output VAT. In such cases, taxpayers may apply for a VAT refund through the Federal Tax Authority (“FTA”) portal.
VAT refunds are commonly claimed by:
- Real estate developers
- Export-oriented businesses
- Scrap traders
- Second-hand car dealers
VAT Refund Process
A successful VAT refund application generally involves the following steps:
- Assess eligibility based on excess recoverable VAT
- Reconcile VAT return balances with accounting records and supporting documents
- Review tax invoices to ensure compliance with UAE VAT requirements
- Submission of Voluntary Disclosure (‘VD’) in case of any incorrect return filed or to align with supporting documentation
- Submit the refund application through the FTA portal along with supporting documentation
- Respond promptly to clarification requests or additional information sought by the FTA
- Monitor the refund status until approval and disbursement
Recent Legislative Updates
I. Federal Decree-Law No. 16 of 2025 – VAT Law
(Effective from 1 January 2026)
- Introduction of a 5-year limitation period for utilization or refund of VAT credits under Article 74(3).
II. Federal Decree-Law No. 17 of 2025 – Tax Procedures Law
(Effective from 1 January 2026)
Key amendments include:
- Excess tax and credit balances must be utilized within 5 years – Article 9(3)
- Refund allowed if credit exceeds tax & penalties, to be claimed within 5 years from end of tax period – Article 38(1)(2)
Exception to time limit for refund applications – Article 38 (3)(4)
- FTA credits: claim within 1 year from the date the credit arises.
- Other late credit: claim within 90 days from the date the credit arises.
Audit and voluntary disclosure time limit – Article 46
- FTA may audit/assess refund claims within 2 years if filed in the 5th year or under Article 38 exceptions.
- Voluntary Disclosure is allowed after 5 years for pending refund claims.
Transitional Relief
Taxpayers whose refund claim period expired before 1 January 2026 have been granted a relief window until 31 December 2026 to submit refund applications.
This effectively allows businesses to claim outstanding VAT refunds relating to tax periods from 2018 to 2020, subject to fulfillment of the prescribed conditions.
VD for refund claims filed during the grace period can be submitted within 2 years, unless the FTA has already decided the refund.
III. Cabinet Decision No. 17 of 2026 – Executive Regulations
(Effective from 1 April 2026)
Key procedural updates include:
- Extension of record retention requirements by an additional 2 years where a refund application remains pending
- Clarification on correction of refund-related errors:
- Errors exceeding AED 10,000 require submission of a VD within 20 business days
- Errors up to AED 10,000 may generally be adjusted in the subsequent VAT return or corrected via VD where applicable
VAT Refund for UAE Nationals Building New Residences
The FTA recently issued the updated VAT Guide (VATGRH1) in April 2026 outlining:
- Eligibility criteria for the New Residences Refund Scheme
- Eligible expenses for refund claims
- Applicable timelines
- Documentary requirements
The FTA has also highlighted common documentation requirements and errors observed in refund applications, including:
- Consistency between application details and supporting documents
- Submission of a bank letter with IBAN on official bank letterhead
- Upload of Municipality completion certificate, where applicable
- Power of Attorney for jointly owned properties authorising one owner to claim the refund
Further, tax invoices must contain all mandatory particulars, including:
- The phrase “Tax Invoice”
- Full name of the property owner/applicant
- Invoice number and date
- Plot number
- Supplier details and TRN
- Taxable amount, VAT amount, and total invoice value
- Description of goods/services supplied
Key Considerations for VAT Refund Filing
- Reconciliation between VAT returns and financial statements
- Availability of valid tax invoices and import documentation
- Correct treatment of blocked input VAT and non-recoverable expenses
- Consistency in accounting records and tax coding
- Adequate supporting documents for zero-rated and export transactions
- Timely response to FTA queries and verification requests
Businesses should conduct a comprehensive review before filing VAT refund applications, as incomplete documentation or inconsistencies may lead to delays, additional scrutiny, or rejection of claims.
A well-prepared VAT refund application not only accelerates recovery timelines but also strengthens overall VAT compliance and reduces future litigation risk.
How AgileVertex Advisory Can Assist
Backed by a team of experienced tax specialists, we at AV Advisory closely work with clients to evaluate implications, address uncertainties, and implement compliant and sustainable tax solutions tailored to their business operations.
Kindly reach us at contact@agilevertexadvisory.com ,+971 588073409
