The UAE has introduced amendments to its Corporate Tax Law to clarify how corporate tax liabilities are calculated and settled when credits and incentives apply. Moreover, the changes aim to give businesses greater certainty when using tax credits, incentives, and reliefs.
The amendments relate to Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. Therefore, they also introduce the ability, in specific cases, for taxable persons to claim payments for unused tax credits, subject to conditions set by the Cabinet.
Order of applying tax credits and incentives
Under the revised rules, corporate tax due must first be offset against any available withholding tax credit balance. As a result, this step follows the mechanism set out under Article 46 of the law.
If a balance remains, foreign tax credits under Article 47 must then be applied. Additionally, any remaining liability may be settled using other incentives or reliefs approved by a Cabinet decision issued on the Minister’s proposal.
Where tax is still payable after all applicable credits and incentives are exhausted, the outstanding amount must be settled in line with Article 48. Consequently, the amendments establish a clear and consistent order for settling liabilities.
Claims for unused credits and administrative changes
A newly introduced provision allows taxable persons, in certain circumstances, to claim payments for unutilised tax credits arising from approved incentives or reliefs. However, such claims will be subject to specific conditions, timelines, and procedures to be determined by the Cabinet.
The amendments also empower the Federal Tax Authority to withhold amounts from corporate tax revenues, and where applicable top-up tax revenues, to settle approved refund claims. Moreover, this process will follow decisions issued by the Authority’s board of directors.
Overall, the changes are intended to enhance transparency, improve administrative clarity, and support the effective implementation of the UAE’s corporate tax regime.
