Key Reasons the FTA Declines Tax Refunds Under Decision No. 9/2025
Businesses operating in the UAE should take note of a significant regulatory update that could directly impact tax refund claims. Effective 1 January 2026, the Federal Tax Authority (FTA) has enhanced its authority to review, withhold, adjust, or reject tax refund requests under FTA Decision No. 9 of 2025. This decision aims to strengthen tax compliance, prevent fraudulent refund claims, and ensure that refunds are issued only after thorough verification.
What Has Changed?
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.
Enhanced Powers Granted to the FTA
Under the new decision, the FTA may:
Conduct Detailed Reviews of Refund Claims
The Authority can perform extensive examinations of refund applications to verify the accuracy and legitimacy of the claim.
Request Additional Supporting Documentation
Businesses may be required to provide invoices, contracts, payment records, shipping documents, and other evidence to support refund requests.
Adjust, Delay, or Reject Refunds
Where concerns arise, the FTA may:
Reduce the refund amount
Suspend the refund pending further clarification
Reject the refund request entirely
Six Key Reasons the FTA May Reject a Tax Refund Request
1. Potential Tax Liability Risks
If an ongoing audit reveals a possibility that the taxpayer may owe a substantial amount of tax, the FTA may withhold the refund until the potential liability is resolved.
2. Suspected Tax Evasion
Refund claims may be rejected where there is evidence or suspicion of tax evasion. This includes situations where transactions are connected to fraudulent activities within the supply chain.
3. Outstanding Tax Return Filings
Businesses with pending VAT, Corporate Tax, or Excise Tax returns may face refund rejections until all filing obligations have been fulfilled.
4. Failure to Respond to FTA Requests
If a taxpayer fails to provide requested information or documentation within the prescribed timeframe, the refund application may be denied.
5. Lack of Cooperation During an 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.
6. Refund Claims Linked to Tax-Evasion Goods
Refund requests associated with goods or transactions connected to tax evasion schemes may be automatically rejected due to heightened compliance risks.
Practical Steps Businesses Should Take
To reduce the risk of refund delays or rejections, businesses should proactively strengthen their tax compliance processes.
Review Historical Tax Records
Conduct a review of previous VAT and tax filings to identify outstanding adjustments, corrections, or unresolved tax positions.
Maintain Comprehensive Documentation
Ensure all transactions are supported by complete and accurate records, including tax invoices, contracts, payment evidence, and logistics documentation.
Perform Supplier Due Diligence
Verify that suppliers maintain proper tax compliance practices. Transactions involving non-compliant suppliers may increase refund risks.
Respond Promptly to FTA Requests
Any request from the FTA should be treated as a priority. Timely responses can significantly improve the refund review process.
Why Compliance Matters More Than Ever
FTA Decision No. 9 of 2025 reflects the UAE’s ongoing commitment to strengthening tax governance and preventing abuse of the refund system. While compliant businesses with strong documentation should have little concern, those with incomplete records or unresolved compliance issues may face significant challenges when seeking refunds. Proactive preparation, proper recordkeeping, and timely responses to FTA inquiries will be essential for securing successful tax refund claims in 2026 and beyond.
How Taxoryx Can Help
Navigating evolving UAE tax regulations requires expertise and continuous monitoring of compliance requirements. Taxoryx provides comprehensive tax advisory and compliance services to help businesses stay prepared for FTA reviews, audits, and refund applications.
Our specialists assist with:
VAT and Corporate Tax compliance
Tax refund application support
Tax audit preparation and representation
Documentation review and risk assessment
Regulatory updates and compliance advisory
By partnering with Taxoryx, businesses can strengthen their tax position, minimize compliance risks, and improve the likelihood of successful refund claims.
Need Expert Tax Support?
Contact Taxoryx today to ensure your business remains fully compliant with UAE tax regulations and prepared for future FTA reviews and audits.
