Tax refunds are often seen by businesses as a straightforward administrative process. However, in the UAE, refund claims are increasingly subject to detailed scrutiny by the Federal Tax Authority (FTA).

With the issuance of FTA Decision No. 9 of 2025, the FTA has clarified specific conditions under which tax refund requests may be rejected, even when a refund appears valid at first glance. This decision marks a clear shift toward stricter compliance, stronger documentation standards, and higher accountability for taxable persons.

For businesses operating in the UAE, understanding this decision is essential to avoid delays, rejections, and compliance risks.

What Is FTA Decision No. 9 of 2025?

FTA Decision No. 9 of 2025 outlines the procedural and substantive grounds on which the FTA may refuse a tax refund application.

The decision applies primarily to:

• VAT refund requests

• Administrative refund claims

• Refunds arising from overpaid or incorrectly declared tax

Its objective is to ensure that refunds are granted only where entitlement is clearly established and fully supported.

Why the FTA Is Tightening Refund Controls

Refunds involve a direct outflow of government revenue. As VAT systems mature, tax authorities globally—including the UAE—are placing greater emphasis on:

• Preventing fraudulent or inflated refund claims

• Ensuring accurate tax reporting

• Encouraging disciplined record-keeping

• Reducing misuse of refund mechanisms

FTA Decision No. 9 of 2025 reflects this broader policy direction by setting clear rejection triggers.

Key Reasons Tax Refund Requests Can Be Rejected

1. Incomplete or Inaccurate Documentation

Refund claims must be supported by clear, consistent, and verifiable records.

The FTA may reject a refund where:

• Tax invoices are missing or invalid

• Required supporting schedules are not submitted

• Documents do not match VAT return data

Even minor inconsistencies can raise red flags during review.

2. Non-Compliance With VAT Registration Obligations

If the applicant:

• Was not properly registered for VAT at the time of the transaction

• Failed to update registration details

• Operated outside the scope of registered activities

the FTA may determine that the refund claim lacks legal standing.

3. Outstanding Tax Liabilities or Penalties

FTA Decision No. 9 of 2025 reinforces the principle that:

Refunds are not processed in isolation.

Where a taxpayer has:

• Unpaid VAT liabilities

• Outstanding administrative penalties

• Pending assessments

the FTA may offset the refund or reject the request entirely until obligations are settled.

4. Errors in VAT Returns or Refund Calculations

Refund claims derived from incorrect VAT returns are particularly vulnerable.

Common issues include:

• Input VAT claimed on non-recoverable expenses

• Mathematical errors

• Misclassification of zero-rated or exempt supplies

If the underlying return is inaccurate, the refund claim will likely fail.

5. Failure to Respond to FTA Clarifications

During review, the FTA may request:

• Additional explanations

• Clarifying documents

• Transaction-level breakdowns

If the taxpayer:

• Misses deadlines

• Provides incomplete responses

• Fails to cooperate

the FTA is entitled to reject the refund application.

6. Refund Claims Linked to Artificial or Non-Genuine Transactions

The FTA has authority to deny refunds where transactions:

• Lack economic substance

• Appear structured solely to obtain refunds

• Involve related parties without commercial justification

This is especially relevant in complex supply chains and group structures.

FTA’s Increasing Focus on Substance Over Form

One of the most important takeaways from Decision No. 9 of 2025 is the FTA’s emphasis on substance.

Refund claims are assessed based on:

• Actual business activity

• Commercial rationale

• Consistency across filings

• Audit trail integrity

A technically correct claim may still be rejected if it lacks commercial credibility.

Industries Most Affected by Refund Scrutiny

While the decision applies broadly, heightened scrutiny is commonly seen in:

• Real estate and construction

• Trading and import/export businesses

• Professional services

• Businesses with frequent refund positions

Complex transactions and high-value supplies naturally attract deeper review.

How Businesses Can Reduce Refund Rejection Risk

To align with FTA Decision No. 9 of 2025, businesses should:

• Maintain clean, reconciled VAT records

• Review refund positions before submission

• Correct VAT returns prior to claiming refunds

• Respond promptly to FTA queries

• Perform internal VAT health checks

• Seek professional review for large or complex claims

Many UAE businesses work with tax advisors such as Swenta to assess refund eligibility, validate documentation, and ensure submissions meet FTA expectations before filing.

What Happens After a Refund Is Rejected?

If a refund request is rejected:

• The FTA will issue a formal decision

• The taxpayer may submit objections within statutory timelines

• Supporting evidence becomes critical at the reconsideration stage

Poor preparation at the initial stage often weakens appeal outcomes.

FTA Decision No. 9 of 2025 sends a clear message:

Tax refunds in the UAE are no longer routine—they are conditional, evidence-driven, and compliance-dependent.

Businesses that treat refunds as a compliance process rather than a formality will significantly reduce rejection risk and regulatory exposure.