The UAE government has issued a Federal Decree-Law amending certain provisions of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporation and Businesses (Corporate Tax Law).
The amendments to the Corporate Tax Law clarify how corporate tax is calculated and settled when tax credits, incentives, or reliefs are applied.
The Decree-Law also allows taxable persons to claim payments for unutilized tax credits, subject to specific conditions, timeframes, and procedures. Together, the changes establish a clear framework for settling corporate tax liabilities where applicable incentives are in place.
Specifically, the new Decree-Law clarifies that the tax liability shall be settled sequentially as follows: first, by using the withholding tax credit balance due to the taxable person, as provided under Article (46) of the Law. Where a balance of due corporate tax remains, the available foreign tax credit, as stipulated under Article (47), shall be availed.
Should any corporate tax liability remain thereafter, any other balances or forms of incentives or reliefs determined pursuant to a decision issued by the Cabinet at the suggestion of the Minister shall be utilized. Any remaining corporate tax due after utilizing the applicable credits and incentives shall be settled in accordance with Article (48) of the Law.
The decree also introduced a new article stipulating that the taxable person may claim a payment in respect of any unutilized tax credits arising from the relevant incentives or reliefs under the Decree-Law referred to above, in certain cases and subject to the conditions, timeframes and procedures set out in a decision issued by the Cabinet at the suggestion of the Minister.
In addition, the newly introduced article authorizes the Federal Tax Authority to withhold amounts from tax revenues and where relevant, any top-up tax revenues for the purpose of settling the approved claims, pursuant to a decision issued by the Authority’s Board of Directors.
