UAE VAT Refund Rules from 1 January 2026: What Businesses Must Know About Audits, Refund Risks & VAT Services in Dubai
The UAE Federal Tax Authority (FTA) continues to refine and strengthen the nation’s tax compliance framework. One of the most critical updates for VAT-registered businesses is FTA Decision No. 9 of 2025, which introduces new conditions under which VAT refund residual amounts may be declined, particularly when a business is subject to a tax audit.
This regulatory shift has major implications for businesses across Dubai and the wider UAE—especially those that regularly apply for VAT refunds or operate in complex supply chains. For such entities, working with experienced professionals offering VAT services in Dubai is no longer optional, but essential.
In this detailed guide, TFAB explains:
- What has changed under the new VAT refund rules
- When and why VAT refunds may be declined
- Key risk areas businesses must address
- How to safeguard refunds through compliance
- How TFAB’s VAT services in Dubai can help your business stay audit-ready
Understanding FTA Decision No. 9 of 2025
From 1 January 2026, the FTA is empowered to temporarily defer or fully decline VAT refund residual amounts if a business is under audit and certain risk indicators are identified.
What Is a VAT Refund Residual Amount?
A VAT refund residual amount refers to the remaining refundable VAT balance after the FTA completes its initial review of a submitted refund claim. Previously, many businesses received these residual refunds even when audits were ongoing. Under the new framework, this is no longer guaranteed.
Why This Update Matters for Businesses in Dubai
Dubai is home to thousands of VAT-registered businesses, including:
- Trading and logistics companies
- Free zone entities
- Manufacturing and distribution firms
- Professional service providers
- Real estate and construction businesses
For these entities, VAT refunds often represent significant cash flow. Delays or denials can disrupt operations, planning, and liquidity—making expert VAT services in Dubai crucial to mitigate risk.
VAT Refund Process: Old vs New Rules
Before 1 January 2026
- VAT refunds during audits were generally allowed
- Pending tax returns were often conditionally accepted
- Audit cooperation standards were flexible
Supply chain risks received limited scrutiny
From 1 January 2026
- Refunds during audits can be declined or deferred
- All tax returns must be strictly compliant
- Full and timely cooperation with audits is mandatory
Supply chain transactions face high-risk assessment
VAT Refund Decision Flow (Simplified)
- VAT Refund Requested
⬇ - Is the Business Under Tax Audit?
- No → Refund usually processed
- Yes → FTA performs a detailed risk review
⬇ - Are risk conditions identified?
- No → Refund released
- Yes → Refund declined or deferred until issues are resolved
Conditions Where the FTA May Decline VAT Refunds
Under the updated rules, the FTA may decline or defer VAT refund residual amounts if any one of the following applies:
To stay ahead of the 2026 deadline, businesses should:
- Identification of potential significant tax liabilities
- Suspicion of tax evasion or misrepresentation
- Refund linked to goods involved in evasion within the supply chain
- Pending or unfiled tax returns (VAT, Corporate Tax, Excise Tax)
- Failure to submit requested records or explanations on time
- Non-cooperation or delayed responses during audits
Even businesses with otherwise clean records may face refund delays if documentation or filings are incomplete.
Key Risk Areas Businesses Must Monitor
Low-Risk Profile (Refund-Safe Businesses)
- All VAT and corporate tax returns filed on time
- Accurate VAT reconciliations
- Well-maintained accounting records
- Transparent supply chain transactions
Prompt and professional audit responses
High-Risk Profile (Refund at Risk)
- Ongoing audits combined with missing filings
- Poor documentation or unsupported claims
- High-risk suppliers or unclear transaction trails
- Delayed or uncooperative audit behaviour
Audit + Non-Compliance = VAT Refund Declined
Why the FTA Introduced These Changes
The UAE’s tax system is evolving to match global best practices. The objectives of Decision No. 9 of 2025 include:
- Preventing misuse of VAT refund mechanisms
- Enhancing supply chain transparency
- Reducing tax evasion risks
- Improving audit effectiveness
- Strengthening trust in the UAE tax framework
For compliant businesses, VAT refunds remain achievable—but preparation is now critical.
What Businesses Should Do Before 1 January 2026
To protect VAT refunds and reduce exposure, businesses should act now:
- File all VAT, Corporate Tax, and Excise returns on time
- Maintain clear VAT reconciliations and documentation
- Review refund claims before submission
- Respond promptly to FTA audit notices
- Conduct internal tax compliance health checks
- Identify supply chain risks early
Engaging professional VAT services in Dubai ensures these steps are implemented correctly and efficiently.
The Role of Professional VAT Services in Dubai
With increasing scrutiny from the FTA, businesses can no longer rely on basic compliance alone. Professional VAT services in Dubai provide:
- Expert interpretation of evolving VAT laws
- Risk assessment before refund submission
- Audit-ready documentation and reconciliations
- Strategic handling of FTA correspondence
- Reduced risk of penalties, delays, and disputes
This proactive approach safeguards both refunds and reputation.
How TFAB Supports Businesses with VAT Services in Dubai
At TFAB Accounting & Business Consultancy, we offer comprehensive VAT services in Dubai designed to protect your business under the new regulatory environment:
Our Key VAT & Compliance Services
- VAT refund review, validation, and filing
- FTA audit support and representation
- VAT & Corporate Tax compliance health checks
- Risk assessment before refund claims
- Supply chain transaction review
- End-to-end accounting and advisory services
Our team ensures your VAT positions are accurate, defensible, and aligned with FTA expectations.
Why Choose TFAB for VAT Services in Dubai?
- Deep expertise in UAE VAT and Corporate Tax laws
- Practical, business-focused compliance solutions
- Proven experience in handling FTA audits
- Proactive advisory approach—not just compliance
We help businesses move from reactive compliance to strategic tax management.
Final Thoughts: Stay Compliant, Stay Confident
The UAE VAT refund rule changes effective from 1 January 2026 place greater scrutiny on audits, documentation, and compliance, making early preparation essential for businesses that want to protect their cash flow and avoid refund delays or rejections. VAT refunds are no longer just about filing claims—they require accuracy, transparency, and full audit readiness at every stage. With expert VAT services in Dubai, businesses can identify risks early, strengthen compliance, and submit refund claims with confidence. TFAB Accounting & Business Consultancy provides end-to-end VAT support, including refund reviews, audit assistance, and compliance health checks, helping you stay aligned with FTA requirements. Take action now—contact TFAB to secure your VAT refunds before the 2026 rules take effect.
Frequently Asked Questions
When do the new VAT refund rules take effect in the UAE?
The new rules under FTA Decision No. 9 of 2025 take effect from 1 January 2026.
Can the FTA decline VAT refunds during an audit?
Yes. From 2026, the FTA can temporarily or fully decline VAT refund residual amounts if risk conditions are identified during an audit.
What are the main reasons VAT refunds may be declined?
Common reasons include pending tax returns, audit non-cooperation, suspected tax evasion, supply chain risks, and incomplete documentation.
Does this affect all VAT-registered businesses in Dubai?
Yes. Any VAT-registered business in Dubai or the UAE that submits refund claims may be affected.