VAT Refund Claims: Application of the 5-Year Time Limit

Executive Summary

The 5-year refund limitation period under Federal Decree-Law No. 28 of 2022 on Tax Procedures applies prospectively from 1 March 2023, meaning pre-existing VAT credits do not automatically "expire" but must be claimed within 5 years from the date the right to the refund arose. Taxpayers with legacy Input Tax credits should assess their refund eligibility promptly, as the limitation period runs from when the refund entitlement originated, not from when the new law took effect.

Legal Basis

• Federal Decree-Law No. 28 of 2022 on Tax Procedures, Article 30 (refund time limits)
• Federal Decree-Law No. 8 of 2017 on Value Added Tax, Articles 54-55 (Input Tax recovery)
• Cabinet Decision No. 74 of 2023 on the Executive Regulation of Federal Decree-Law No. 28 of 2022, Article 13 (refund procedures)
• Cabinet Decision No. 52 of 2017 (VAT Executive Regulation), Articles 53-55 (Input Tax deduction rules)

Analysis

The 5-Year Limitation Framework

Under Article 30 of Federal Decree-Law No. 28 of 2022, a Taxable Person may not claim a Tax refund after 5 years from the end of the relevant Tax Period in which the refund entitlement arose [Federal Decree-Law No. 28 of 2022, Article 30(1)]. This provision establishes a statutory cut-off for all refund claims, including accumulated Input Tax credits carried forward on VAT returns.

Application to Pre-Existing Credits

The Tax Procedures Law took effect on 1 March 2023, replacing the previous Federal Law No. 7 of 2017. Key considerations include:

• Credits accumulated before March 2023 remain valid but are now subject to the 5-year rule


• The limitation period is calculated from when the Input Tax was incurred, not from the law's effective date


• Credits from Tax Periods ending before March 2018 may already be time-barred

> ⚠️ Important: VAT credits from Tax Periods ending in Q1 2018 (the first VAT periods) reached the 5-year threshold in Q1 2023. Immediate review of legacy credit positions is essential.

Key Requirements

• Time Limit: 5 years from the end of the Tax Period in which the refund right arose [Article 30(1)]
• Refund Application: Must be submitted via the form and means specified by the Authority [Cabinet Decision No. 74 of 2023, Article 13]
• Supporting Documentation: Retain Tax Invoices and import documentation for the full limitation period
• Excess Input Tax: Carried-forward credits on returns do not reset the limitation clock—the original incurrence date governs

Dependencies

The refund entitlement depends on proper Input Tax recovery eligibility under VAT law:

• Input Tax must relate to Taxable Supplies or zero-rated supplies [Federal Decree-Law No. 8 of 2017, Article 54]


• Blocked Input Tax categories (e.g., entertainment, certain vehicles) remain non-recoverable regardless of timing


• Apportionment rules apply where inputs relate to both taxable and exempt supplies

Critical Considerations

• No Automatic Expiry: Credits do not vanish from your VAT account automatically; however, the FTA may reject refund claims submitted beyond the 5-year window
• Proactive Claims: If you have substantial legacy credits, consider submitting a refund application rather than continuing to carry forward indefinitely
• Record Retention: The Tax Procedures Law requires records to be kept for 7 years after the end of the relevant Tax Period [Federal Decree-Law No. 28 of 2022, Article 57], which exceeds the refund limitation period
• Transitional Position: Specific transitional provisions for credits straddling the old and new Tax Procedures Laws were not found in the analyzed legislation; FTA guidance should be sought for complex legacy positions

> 💡 Note: The 5-year rule applies to refund claims, not to the utilization of Input Tax credits against Output Tax on ongoing returns. However, perpetually carrying forward credits without claiming a refund may indicate a need to review your VAT position.