The UAE government has issued a Federal Decree-Law amending provisions of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporation and Businesses, known as the Corporate Tax Law.
The amendments clarify the mechanism for calculating and settling corporate tax due in cases where tax credits or other forms of tax incentives and reliefs are applied.
UAE amends Corporate Tax law to clarify tax credit settlement mechanism
The Decree-Law sets out how tax liability shall be settled. The process follows a sequence.
First, the withholding tax credit balance due to the taxable person shall be utilised, as provided under Article 46 of the Law. Where a balance of due corporate tax remains, the foreign tax credit available shall be utilised, as stipulated under Article 47.
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 utilised.
Any remaining corporate tax due after utilising the credits and incentives shall be settled in accordance with Article 48 of the Law. The decree introduces a provision granting taxable persons the right to claim a payment in respect of unutilised tax credits.
The claims arise from incentives or reliefs under the Decree-Law and are subject to conditions, timeframes and procedures set out in a decision issued by the Cabinet at the suggestion of the Minister.
UAE Federal Tax Authority granted powers to settle tax credit claims
The Decree-Law authorises the Federal Tax Authority to withhold amounts from corporate tax revenues for the purpose of settling the claims that have been approved.
Where relevant, the Authority may also withhold amounts from top-up tax revenues, pursuant to a decision issued by the Authority’s Board of Directors.
