For many UAE businesses, the next major tax risk will not come from a rate increase. It will come from time.

Effective January 1, 2026, a significant amendment to the UAE’s value added tax (VAT) and tax procedures framework introduced a strict five-year deadline for claiming excess VAT credits or refund balances. Any amount not recovered or formally claimed within that period lapses permanently.

CA Chirag Agarwal, Tax Agent - Corporate Tax, Cofounder and CEO of
Earningo Accounting & Tax Consultancy LLC

This marks a fundamental shift in how businesses must treat VAT positions.

For years, excess input VAT was often carried forward with little urgency. Many finance teams viewed it as a balance that could be addressed later — after payroll, vendor payments, and operational priorities. That approach is no longer viable and sustainable.

VAT credits are now time-bound financial assets. If left unmonitored, they lose value. The greater risk is not technical complexity, but delay.

For many SMEs, refund balances accumulate gradually through capital expenditure, export-oriented transactions, or periods of higher input tax. Because these balances rarely feel urgent, they are often rolled forward quarter after quarter.

Under the revised framework, credits from 2021 are already expiring in phases through 2026, while older balances from 2018 to 2020 fall within a transitional relief window ending December 31, 2026. After that, recovery will no longer be possible.

This is where the cash flow impact becomes real and tangible.

What appears today as a current asset on the balance sheet can ultimately translate into reduced liquidity, reduced profitability, constrained reinvestment capacity, or avoidable working capital pressure.

At the same time, the environment around refund claims is becoming more disciplined. Claims submitted close to statutory deadlines are likely to face greater scrutiny, with stronger expectations around invoice validity, supplier compliance, and robust audit trails.

For business owners and CFOs, this is no longer simply a compliance matter. It is a treasury and liquidity issue.

The most important question is no longer how much credit sits on the books. It is how much time remains before it expires.

In the evolving UAE tax landscape, time itself has become a financial variable — and complacency may prove more expensive than complexity.

As Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has said: “The future belongs to those who are prepared for it today.”

In this environment, preparedness means acting early. Businesses that monitor closely and move decisively will protect cash flow and stay ahead.