Tax Refund

Law, Rules, Controls & Procedures

Read this content in the context of UAE’s Value Added Tax [“VAT”]

The whole set of provisions have been covered under the below mentioned Laws & their regulations:

Value Added Tax Law__w.e.f. Jan2026_ Federal Decree Law no. 16of2025
Executive Regulations to Value Added Tax Law_Cabinet Decision no. 52 of 2017_w.e.f. 29^th Sept 2025
Tax Procedure Law_w.e.f. Jan 2026_Federal Decree Law no. 17 of 2025
Executive Regulations to the Tax Procedures Law_w.e.f.1^st Aug2023

Tax Refunds Explained: When the Government Owes You Money

A tax refund simply means this: you have paid more tax than what you were legally required to pay, and the excess belongs to you. In the UAE tax system, refunds are not discretionary. They are a built-in fairness mechanism to correct overpayments and preserve neutrality.

How Does a Tax Refund Arise?

Refunds typically arise in three situations:

First, where tax was overpaid due to calculation errors, incorrect treatment, or excess payment while filing.

Second, where a business pays more tax on purchases than it collects on sales, common in exports, zero-rated supplies, or capital-intensive phases.

Third, in special policy cases, such as new residential homes for UAE citizens, exports by visitors, or qualifying foreign and diplomatic entities.

Refund vs Carry-Forward: What Happens First?

Any excess tax is first adjusted against:

Outstanding tax dues, and
Any penalties or administrative amounts.

Only the net balance becomes refundable. If no refund is requested, the excess is carried forward to future periods.

Time Limits for Claiming a Refund (and Why They Matter)

A refund right is not open-ended. The law prescribes clear timelines.

The general rule

A refund application must normally be made within five years from the end of the tax period in which the excess tax arose. This five-year window applies whether the excess resulted from:

Overpayment,
Filing of a tax return,
A voluntary disclosure, or
A tax authority assessment or decision.

Late-arising credits: two important exceptions

Sometimes, the refundable balance appears very late, either after the five-year period has ended or in its final 90 days. The law provides relief:

If the balance arises due to a decision issued by the tax authority, the taxpayer has one year from the date the balance arises to apply for a refund.
If the balance arises for any other reason, the refund application must be filed within 90 days from the date the balance arises.

Carry-forward is also time-bound

Even if you do not apply for a refund, excess tax cannot be carried forward indefinitely. The carry-forward itself is effectively capped at five years from the end of the relevant tax period. After that, unused credits lapse.

Missing these timelines means the refund right is lost, even if the excess tax is undisputed.

Is a Refund Automatic?

No. Refunds are claim-based, not automatic. A proper application, consistent tax returns, and supporting documents are essential. The authority may review or verify before releasing funds—this is procedural, not punitive.

A Forward-Looking Perspective: Refunds as a Cash-Flow Tool

Well-managed businesses do not treat refunds as an afterthought. They:

Monitor refund eligibility actively,
Avoid letting credits stagnate, and
Use refunds strategically to manage liquidity.

In a mature tax system, efficient refunds reflect disciplined compliance, not aggressive tax behaviour.

The Bottom Line

A tax refund is a legal entitlement, but one that is time-sensitive.
Know when your refund arises, how long you have to claim it, and when exceptions apply.

Handled correctly, refunds are not just recoveries, they are a financial hygiene mechanism built into the system.

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Extracts of the relevant Laws & regulations

Chapter Three – Carrying forward the Excess of Recoverable Tax and Tax Recovery

Article 74 – Excess Recoverable Tax32

1. Subject to the provisions of the Tax Procedures Law and its Executive Regulation, and without prejudice to the Authority’s right to offset in accordance with the provisions of Clause 2 of this Article, the Taxable Person shall be entitled to apply to the Authority to recover excess Recoverable Tax, or part thereof, in accordance with the time limits and procedures specified in the Executive Regulation of this Decree-Law, in the following cases:

a. If the Taxable Person’s recoverable Input Tax set forth in this Decree-Law exceeds the Output Tax payable for the same Tax Period.

b. If the Tax paid to the Authority by the Taxable Person exceeds the Payable Tax according to the provisions of this Decree-Law, other than in the instance mentioned in Paragraph (a) of Clause 1 of this Article.

2. The Authority shall offset the excess Recoverable Tax against the Payable Tax or any Administrative Penalties imposed in accordance with the provisions of this Decree-Law or Tax Procedures Law.

3. If no request is submitted to recover the excess after offsetting, the excess shall be carried forward to subsequent Tax Periods for a period not exceeding (5) five years from the end of the Tax Period in which the excess arose. In the event that no request to recover the excess has been submitted or it was not used to settle any Tax liabilities before the expiry of this period, the right to claim such excess shall lapse and may not be used to settle any Tax liabilities.

(ii) Title Fifteen – Recovery of Excess Tax

Article 65 – Recovery of Excess Tax 37

If the Taxable Person has excess Recoverable Tax for a Tax Period and has made a request to the Authority by the means specified by the Authority to be repaid the amount of the excess, then the Authority shall repay the amount to the Taxable Person within the timelines and according to the procedures specified in the Tax Procedures Law.

(iii) Title Five – Refund and Collection of Tax

Chapter One – Refund of Tax

Article 38 – Application for Refund of Credit Balance

1. A Taxpayer may apply for a refund of any credit balance where he is entitled to a refund under the provisions of the Tax Law, where it was established that such credit balance is in excess of the Payable Tax and Administrative Penalties, pursuant to the procedures specified in the Executive Regulation.

2. The refund application must be submitted within a period not exceeding (5) five years from the end of the Tax Period to which any of the following applies, as the case may be:
a. The excess payment was made, if the credit balance resulted from an excess Tax payment.
b. The Tax Return or Voluntary Disclosure was submitted or the Tax Assessment was issued, if the credit balance resulted from a Tax Return or a Voluntary Disclosure submitted to the Authority, or otherwise from a decision issued by the Authority.
c. The credit balance arose, in any other cases.
3. As an exception to the provisions of Clause 2 of this Article, if the credit balance arose as a result of a decision issued by the Authority after the expiry of the (5) five years period referred to or during the last (90) ninety days thereof, the Taxpayer may submit the refund application within one year from the date on which this balance arises.
4. Without prejudice to the provisions of Clause 3 of this Article, if the credit balance arose in any other case after the expiry of the (5) five years period referred to or during the last (90) ninety days thereof, the Taxpayer may submit the refund application within (90) ninety days from the date on which this balance arises.
5. The Authority shall review the application submitted under this Article and notify the Taxpayer of its decision as to whether it has accepted or rejected the application.
6. If the refund application is not submitted according to the deadlines provided for in this Article, the right to claim a refund of the excess Tax paid or the credit balance shall lapse.

(iii) Article 39 – Tax Refund Procedures

1. The Authority shall set-off the amount requested to be refunded against any non-disputed Payable Tax or Administrative Penalties from the Taxpayer who has applied for the refund pursuant to the Tax Return or the Tax Assessment issued by the Authority before refunding any amount relating to a specific Tax.

2. The Authority may decline to refund any residual amounts under Clause 1 of this Article in any of the following cases:

a. The Authority finds that there are other disputed Tax amounts in relation to that Taxpayer;

b. If the Person is subject to a Tax Audit, and in this case the Authority shall not decline to refund the residual amount unless the conditions set out in a decision of Authority’s board of directors have been met;

c. According to an order from the Competent Court.

3. The Authority shall refund the Tax under this Article pursuant to the procedures and controls specified in the Executive Regulation.

(iii) Article 9 – Determination of Payable Tax

3. If the Taxable Person pays an amount greater than the value of the Payable Tax, or has a credit balance with the Authority, the Authority may allocate the amount or credit balance to settle any Tax or liabilities to the Authority, within a period not exceeding (5) five years from the end of the relevant Tax Period referred to in Clause 2 of Article 38 of this Decree-Law, as specified in the Executive Regulation.

(iv) Article (26)

Tax Refund Procedures

1. A Taxpayer who is entitled to refund of Tax under the Tax Law or the Decree-Law may apply for the refund in the form and manner approved by the Authority.

2. The Authority shall decide on the refund application submitted under Clause (1) of this Article and notify the Taxpayer of its decision within (20) twenty Business Days from the date of submission of the refund application, or within any other period required to decide on the refund application, provided that the Taxpayer has been duly notified.

3. Where the Authority approves a refund application, it shall, within (5) five Business Days from the date of the Notification under Clause (2) of this Article, initiate the procedures of repayment to the Taxpayer in accordance with the mechanism determined by the Authority.

4. The Authority may defer the Tax refund until the receipt of Tax Returns that have not been submitted at the time its refund application is received, until such time when all due Tax Returns are submitted to the Authority. Any excess amount shall be refundable once such Tax Returns are submitted, in accordance with the Decree-Law and the Tax Law.

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