Two 2026 changes deserve a place on every finance team's year-end checklist: excess VAT credits now have a five-year life, and the administrative penalty regime has been reset.
1. Excess VAT credits now expire
Timing matters: the five-year period and transitional relief depend on the facts of each balance. Review the amended Tax Procedures Law before assuming a particular 2021 credit expires on a particular day.
From 1 January 2026, amendments to the VAT Law and Tax Procedures Law set a five-year window to claim a refund of a credit balance or use it against other tax liabilities. Credits can no longer be carried forward indefinitely.
Older balances, including some associated with 2021 periods, need prompt review. The precise five-year start date depends on how and when the balance arose. A one-year transitional window applies to credits whose period had already expired, or would expire within a year of 1 January 2026.
Action: pull your FTA credit ledger, age every balance by the period it arose, and file refund requests for the oldest ones first.
2. Penalties are lighter — but not gone
Cabinet Decision No. 129 of 2025, effective 14 April 2026, revised parts of the administrative penalty framework. Confirm the applicable amount for each issue under the current decision.
The revised framework does not remove filing and payment duties. Late registration and late filing still cost the same, and the gap between penalties on a voluntary disclosure and those raised in an FTA audit is wide.
What to do now
- Reconcile your VAT credit balances against the EmaraTax ledger.
- Check the statutory clock for older credit balances and submit eligible refund applications within the applicable period.
- Review past returns for errors and correct them by voluntary disclosure, not after an audit.
- Diary every return and payment date for 2027.
How Growbox Auditing can help: We can review the VAT ledger and identify credits or return issues for further action under a separate tax-support engagement. Contact our team for a VAT health check.
This article is general information, not tax advice for your specific situation.