Why FTA Declines Tax Refunds: Decision No. 9/2025

FTA Declines Tax Refunds — three words that no UAE business wants to encounter after submitting a carefully prepared tax refund application. For years, UAE businesses treated the refund process as relatively predictable: submit the application, provide supporting documents, wait for the FTA to process. From 1 January 2026, that expectation no longer holds.

FTA Decision No. 9 of 2025, issued on 4 December 2025 and in force from the first day of this year, gives the Federal Tax Authority explicit, codified authority to withhold — and outright decline — the residual portion of a tax refund where the business is simultaneously subject to a tax audit. The decision lists six specific conditions, any one of which is sufficient grounds for the FTA to refuse payment.

For businesses that have been accumulating VAT credits, preparing to submit their first corporate tax refund application, or managing aged credit balances approaching the five-year expiry window introduced by Federal Decree-Law No. 17 of 2025, this decision changes the calculation fundamentally. A refund that took months of documentation work to prepare can be declined in a single FTA decision — and for a reason that might have nothing to do with the refund itself.

This guide explains Decision No. 9/2025 in full — what it says, what the six conditions mean in practice, which businesses are most exposed, how the decision interacts with the five-year VAT credit limitation, and what to do if the FTA declines your refund.

Understanding the Legal Foundation of Decision No. 9/2025

Before looking at the six conditions, it helps to understand what the decision actually is and why it was issued.

FTA Decision No. 9 of 2025 was issued on 4 December 2025, effective from 1 January 2026. It is grounded in Federal Decree-Law No. 28 of 2022 on Tax Procedures and was approved by the FTA Board of Directors at its 41st meeting on 30 October 2025.

The decision’s formal title — “Conditions for Declining the Refund of Residual Amounts Where the Person is Subject to a Tax Audit” — tells you everything you need to know about its scope. It applies specifically when two conditions are simultaneously present: first, the business is undergoing a tax audit, and second, it has submitted a refund application for residual tax amounts.

What is a “residual amount”?

This term is used in the decision without a plain-English definition, and no competitor blog adequately explains it. The residual amount is the net portion of a refund that remains after the FTA has already deducted or offset any outstanding tax debts, penalties, or adjustments against the gross refund claimed. It is not the total amount claimed — it is what would be left over for the FTA to pay out after all standard deductions are applied. Decision No. 9/2025 gives the FTA authority to withhold even this net residual payable amount under the conditions specified.

What taxes does it cover?

This Decision applies to Persons subject to Tax Audit who have submitted a refund request for residual amounts. It applies across all applicable UAE taxes, including Excise Tax, VAT and Corporate Tax.

This broad cross-tax application is significant. The decision is not a VAT-only measure. A business under a corporate tax audit with a pending VAT refund application is fully within scope. A business under an excise tax audit with VAT credits to claim is also in scope. The FTA’s authority to decline applies regardless of which tax type the audit covers or which tax type the refund relates to.

Previously, businesses generally expected tax refunds to be processed once the necessary applications were submitted. Under the new framework, however, the FTA may suspend or reject refund claims if certain compliance concerns arise, particularly when a taxpayer is undergoing a tax audit. This means that filing a refund application no longer guarantees approval. Businesses must now demonstrate full compliance and maintain adequate supporting documentation to substantiate their claims.

FTA Declines Tax Refunds: The Six Conditions Explained

From 1 January 2026, the FTA has the legal right to put your refund request on hold or decline it entirely if you qualify under any of the six conditions. Here is each condition explained in full — including the practical implications and risk indicators that no competitor adequately covers.

Condition 1 — Significant Tax Liabilities May Arise From the Audit

The FTA may decline to refund residual amounts where there is sufficient evidence supporting the possibility that significant tax liabilities may arise based on the Tax Audit.

This is the most broadly applicable condition. If the FTA’s audit work has produced findings — even preliminary or unconfirmed ones — that suggest the business may owe a significant additional amount of tax, the FTA can withhold the refund pending resolution. The logic is straightforward: paying out a refund and then subsequently issuing a tax assessment for a similar or larger amount would be administratively contradictory.

What “sufficient evidence” means in practice: The standard is deliberately not defined in the decision, giving the FTA discretion. In practice, “sufficient evidence” of potential significant liability typically arises from revenue discrepancies between VAT returns and corporate tax returns, large unexplained variances in declared inputs or outputs compared to industry norms, or preliminary findings from document review showing that deductions or credits have been claimed incorrectly.

The voluntary disclosure interaction: If your business has a known error in a previous return and simultaneously has a pending refund application, the sequence matters critically. Submitting a voluntary disclosure before the refund application — or before an audit commences — corrects the liability position and removes the FTA’s basis for applying Condition 1. Waiting until the audit discovers the error makes Condition 1 far more likely to be invoked. This is a planning decision, not just a compliance decision, and getting the sequence right can be the difference between receiving a refund and having it declined.

Condition 2 — Suspected Tax Evasion by the Taxpayer

The FTA may decline to refund residual amounts where there are sufficient grounds to believe that the Person is involved in Tax Evasion.

Tax evasion is the most serious basis for a refund decline. It triggers not only the withholding of the refund but also the FTA’s extended 15-year audit limitation period under Federal Decree-Law No. 17 of 2025 — compared to the standard 5-year period for routine audit situations.

In practice, evasion indicators that reach the “sufficient grounds” threshold include: systematic underreporting of taxable supplies across multiple tax periods; structured transactions designed to artificially reduce VAT output while maximising input tax recovery; use of fictitious invoices or artificially inflated purchase values; and business structures designed to obscure the true nature of taxable activities.

Protective step: Ensure your filing history is consistent across periods and that every return figure is supportable by documented transactions. The FTA’s risk-analytics systems flag statistical anomalies — businesses with input VAT recovery rates significantly above the sector average, or with revenue patterns that are inconsistent with their customs import data, are higher-risk for this condition.

Condition 3 — Refund Relates to Goods Suspected of Supply Chain Tax Evasion

The FTA may decline to refund residual amounts where the refund request relates to Goods suspected of being part of Tax Evasion within the supply chain.

This condition is critically important and significantly underexplained in competitor content. It can result in a refund being declined not because of anything the applicant business has done wrong, but because of how goods moved through the supply chain before reaching it.

Under Federal Decree-Law No. 16 of 2025 (effective 1 January 2026), the FTA can deny input VAT recovery if a transaction involved a supply chain connected to tax evasion and the taxpayer knew or should have known about it. Decision No. 9/2025 extends this principle to the refund context — a refund claim for input VAT on goods that the FTA suspects were involved in supply chain fraud can be declined on this basis.

What this means for businesses: You are responsible for who you buy from. If your direct supplier is VAT-registered and apparently compliant, but a supplier two tiers up the chain is not, the FTA may determine that the goods passed through a tainted supply chain and decline your refund on that basis.

Protective steps:

• Verify supplier TRN registration through the FTA’s public TRN verification portal before completing each purchase
• Maintain records of supplier verification checks with timestamps
• Request copies of your direct suppliers’ VAT registration certificates for significant purchases
• Document your due diligence process and make it part of your standard procurement workflow

Condition 4 — Outstanding Tax Returns Across Any Tax Type

The FTA may decline to refund residual amounts where the Taxable Person has outstanding Tax Returns in respect of any type of Tax.

This is the simplest condition operationally — and the most easily preventable — yet it is the one most likely to catch businesses off guard.

Outstanding tax returns for any tax type block refunds across all tax types. A business with a pending VAT refund application that has an overdue corporate tax return, an unfiled excise tax return, or a late VAT return for a previous period will have its refund application declined until every outstanding filing is resolved.

The cross-tax-type application of this condition is its most significant feature. Many UAE businesses manage VAT, corporate tax, and excise tax through separate teams, advisors, or processes. A gap in one area can silently block a refund in another — discovered only when the FTA declines the application.

The fix — and it must happen before you submit any refund application: Conduct a cross-tax-type filing audit: are all VAT returns filed for every period up to and including the current one? Has the corporate tax return been filed for any completed financial year? If the business has excise tax obligations, are all EX201 returns current? Every single outstanding return must be filed before a refund application is submitted. There is no workaround.

Condition 5 — Failure to Provide Requested Information Within the Audit Timeline

The FTA may decline to refund residual amounts where the Person fails to provide the information requested by the Authority regarding the Tax Audit within the specified timeline.

When the FTA issues an audit notice, it specifies a timeline — typically 15 to 20 business days — within which the business must produce requested documents and records. Failure to meet this deadline, even partially, gives the FTA grounds to decline any pending refund application under this condition.

If a taxable person does not submit documents requested by the FTA within the timeline specified, it becomes a reason for the FTA to decline the residual refund.

This condition underscores why audit readiness is not just about having the right records — it is about being able to produce them quickly. A business whose financial records are disorganised, stored in inaccessible formats, or spread across multiple systems that require significant time to query cannot meet a 15-20 business day document production deadline reliably.

The practical implication: Under Federal Decree-Law No. 17 of 2025, the FTA can now arrive at a business without prior notice in specific enforcement situations. If your records are not routinely maintained in an organised, accessible, and retrievable format, you have no protection against this condition being invoked.

Extensions are available but not guaranteed: A formal extension request can be submitted to the FTA when the volume of documents genuinely requires more time. However, the FTA has discretion on whether to grant it, and repeated delays or partial responses are likely to be treated as a failure to cooperate.

Condition 6 — Lack of Cooperation With the FTA During the Audit

The FTA expects full cooperation during tax audits. Delays in providing records or restricted access to information may result in refund claims being blocked.

Condition 6 is broader than Condition 5. While Condition 5 specifically addresses failure to produce information within a set timeline, Condition 6 covers the general posture of cooperation throughout the audit process. This includes: restricting FTA auditors’ physical access to premises or records; providing incomplete or evasive responses to auditor queries; changing or deleting records after an audit notice is received; and failing to make key personnel available for interviews when requested.

Under Federal Decree-Law No. 17 of 2025, obstructing an FTA audit inspector carries separate criminal liability in addition to the administrative consequences of having a refund declined under this condition.

The right approach from the moment an audit notice is received: Engage professional representation, compile all documents on the requested list, make your premises and systems accessible to auditors on the scheduled date, and designate a single point of contact within your organisation for all FTA communications during the audit period.

The 5-Year VAT Credit Limitation — A Separate but Connected Deadline

No discussion of FTA Decision No. 9/2025 in 2026 is complete without addressing the five-year VAT credit limitation that became effective on the same date.

The UAE’s VAT system is set for a major update effective 1 January 2026 under FTA Decision No. 9 of 2025 on the Conditions to Decline the Refund of Residual Amounts. This amendment introduces a statutory five-year limitation period for claiming or utilising VAT credit balances from previous tax periods. Failure to act before the deadline could result in significant financial loss for many businesses.

Each VAT credit is now linked to a fixed expiry date calculated from the tax period it was incurred. The rule applies universally to all types of recoverable input VAT, whether arising from purchases, zero-rated exports, or capital investments.

What this means for 2026: Any input VAT credit balance from a tax period ending in 2020 or earlier has already reached or is approaching the five-year expiry. A transitional window applies for the 2026 calendar year — credits that expired or will expire before 1 January 2027 can be claimed within this transitional period. After 31 December 2026, those claims are permanently barred.

The compounding risk: A business with aged VAT credits that submits a refund application in the transitional window — correctly and on time — but is simultaneously under an FTA audit where any of the six conditions in Decision No. 9/2025 are present, faces a scenario where its refund is declined precisely at the moment its claim deadline expires. The refund is gone permanently.

This is the most financially consequential risk combination in the 2026 UAE tax environment: the five-year credit expiry and the Decision No. 9/2025 decline conditions converging on the same business at the same time. Businesses with aged VAT credits must ensure full compliance across all six conditions before submitting any transitional refund application.

What to Do After a Refund is Declined

If the FTA issues a decision declining your refund application under Decision No. 9/2025, you have formal dispute rights — and they must be exercised within strict timelines.

Step 1 — Reconsideration Request (within 20 business days): Submit a formal Reconsideration Request to the FTA within 20 business days of receiving the decline decision. The request must identify the specific condition cited by the FTA as the basis for the decline, provide evidence addressing that condition, and formally request that the FTA review its decision. The FTA issues a Reconsideration Decision within 40 business days.

Step 2 — Tax Disputes Resolution Committee (TDRC) (within 20 business days of Reconsideration Decision): If the Reconsideration Decision upholds the decline, the business can escalate to the TDRC — an independent body that reviews FTA decisions. The TDRC considers both parties’ evidence and issues a binding decision.

Step 3 — Federal Court: Further appeal beyond the TDRC is available through the federal court system, though this pathway is typically reserved for significant disputed amounts given the cost and time involved.

The most important factor in a successful reconsideration: Addressing the specific condition cited, not the general facts of the refund claim. A Reconsideration Request that argues the refund is legitimate without directly addressing why the cited condition should not apply will not succeed. Professional representation that understands the legal basis of each condition produces significantly better outcomes.

Which UAE Businesses Are Most at Risk

Not all UAE businesses face equal exposure to the conditions in Decision No. 9/2025. The highest-risk profiles are:

Exporters and zero-rated suppliers: Businesses that regularly generate large VAT refund claims because they make zero-rated supplies (exports) with significant UAE input VAT costs are frequent refund applicants — and therefore more frequently in the position where a concurrent audit could trigger Decision No. 9/2025 conditions.

Property developers: Construction of residential and commercial properties generates substantial input VAT during the development phase. Developers who submit periodic refund claims while their projects are under FTA review are directly exposed.

Businesses with aged credit balances submitting transitional 2026 claims: As discussed above, this is the highest-risk combination — a last-chance refund application for expiring credits, submitted while under audit.

Businesses in FTA sector-review campaigns: When the FTA targets an entire industry — real estate, hospitality, trading — every business in the sector is effectively under heightened scrutiny, even before a formal individual audit notice is issued.

Multi-entity groups managing taxes separately: Groups where VAT, corporate tax, and excise tax are managed by different teams or advisors risk having an outstanding filing in one area block a refund in another — discovered only when the decline decision arrives.

Conclusion: FTA Declines Tax Refunds Is Now a Real, Manageable Risk — If You Prepare

FTA Declines Tax Refunds under Decision No. 9/2025 is not a theoretical risk for well-managed, compliant businesses. It is a live enforcement tool that the FTA is legally entitled to use from 1 January 2026 against any business that is both under audit and has a pending refund application where any of the six conditions are present.

The businesses that will be most affected are those that have not been managing their cross-tax-type compliance holistically — where VAT is clean but corporate tax has an outstanding return, or where the main business is compliant but a subsidiary’s excise obligations have been overlooked. And the businesses that are least at risk are those whose records are organised, whose filings are current across every tax type, whose supply chains have been verified, and who cooperate immediately and completely when the FTA comes knocking.

In 2026, with the five-year VAT credit expiry window closing at year-end, a successful refund application is not just about preparing the refund claim itself — it is about ensuring that the entire compliance position of the business can withstand FTA scrutiny at the same time.

Why My Taxman Is the Best Choice for Protecting Your Tax Refund in UAE

Navigating FTA Decision No. 9/2025 requires a team that manages your complete UAE tax position — not just your VAT refund application in isolation. My Taxman is built exactly for this.

We conduct pre-refund compliance audits across all tax types. Before submitting any refund application, our team checks your filing status across VAT, corporate tax, and excise tax simultaneously — ensuring Condition 4 (outstanding returns) cannot be invoked. We identify any cross-tax gaps and resolve them before the refund application goes in.

We prepare and submit refund applications with full documentation. Our refund team prepares complete, FTA-standard documentation packages — invoices, contracts, import declarations, zero-rating evidence, and supply chain verification records — that address every potential audit trigger before the FTA has a reason to raise one.

We verify your supply chain compliance. For businesses exposed to Condition 3 (supply chain evasion risk), our team implements supplier TRN verification processes and documents your due diligence — creating a clear audit trail that demonstrates you took reasonable steps to verify every supplier in your chain.

We sequence voluntary disclosures and refund applications correctly. If your business has errors in previous returns and pending refund applications, the sequence matters enormously. Our team manages both in the right order — correcting errors through voluntary disclosure first, then submitting the refund application in a clean compliance position.

We represent you if the FTA declines your refund. If a decline is issued, our team prepares and submits the Reconsideration Request with targeted, condition-specific evidence — giving your business the strongest possible chance of having the decision reversed.

We are a 4.9-star rated UAE tax firm trusted across Dubai and the Emirates. Our clients — developers, exporters, trading companies, and professional services firms — trust us with their most important FTA interactions. That track record includes successfully supported refund applications and FTA audit representations across multiple tax types.

📞 Call us: +971-543223140 📧 Email: connect@mytaxman.ae 🌐 Visit: mytaxman.ae

If you have a pending VAT or corporate tax refund application, or aged VAT credits approaching the 31 December 2026 expiry deadline, talk to My Taxman today. We will review your complete compliance position and ensure your refund application is submitted from the strongest possible foundation.

FAQS FOR FTA DECLINES TAX REFUNDS