UAE Updates Corp Tax Law to Clarify Use of Incentives, Credit Settlements

The UAE government has issued a Federal Decree-Law amending certain provisions of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law), introducing greater clarity on how corporate tax is calculated and settled when tax incentives and reliefs are applied.

The amendments set out a clear mechanism for calculating and settling corporate tax liabilities where tax credits or other approved incentives are utilised. They also grant taxable persons the right, in prescribed cases, to claim a payment in respect of unutilised tax credits, subject to conditions, timeframes and procedures to be determined by the Cabinet at the suggestion of the Minister.

Under the revised framework, corporate tax liabilities must be settled sequentially. First, the withholding tax credit balance due to the taxable person is applied, in accordance with Article 46 of the law. If any tax remains payable, the available foreign tax credit under Article 47 is then utilised. Should a balance still remain, any other incentives or reliefs approved by a Cabinet decision, based on a proposal from the Minister, are applied. Any outstanding corporate tax after these steps must be settled in line with Article 48 of the law.

The Decree-Law also introduces a new provision allowing taxable persons to claim payments for unutilised tax credits arising from applicable incentives or reliefs, in specific circumstances and in accordance with Cabinet-approved rules.

In addition, the amendments authorise the Federal Tax Authority to withhold amounts from corporate tax revenues, and where applicable top-up tax revenues, to settle approved claims, pursuant to a decision issued by the Authority’s Board of Directors.

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