The UAE government confirmed on Monday that it has introduced amendments to the country’s corporate and business tax law to clarify how corporate tax is calculated and settled when tax credits, incentives, or reliefs are involved.
The update was issued through a new decree-law on December 15, according to official statements reported by local media.
In simple terms, the amendments explain the order in which tax credits must be applied and allow businesses to claim payments for unused tax credits, subject to specific conditions and timelines. The move aims to reduce uncertainty for companies and improve consistency in tax treatment.
Under the updated law, corporate tax liability will now be settled in a fixed sequence. First, any available withholding tax credit must be used. If tax remains due, foreign tax credits will be applied. After that, other incentives or reliefs approved by the Cabinet can be utilised. Any remaining corporate tax must then be paid under the standard payment rules.
The decree also grants taxable persons the right to claim payments for unutilised tax credits arising from approved incentives or reliefs. These claims will be subject to procedures, conditions, and timeframes set by the authorities, ensuring oversight while providing relief to eligible businesses.
In addition, the amendments authorise the Federal Tax Authority to withhold amounts from corporate tax revenues, and where relevant, top-up tax revenues, to settle approved claims. This provision strengthens the administrative mechanism for handling refunds and adjustments.
Tax experts say the update does not introduce new taxes but fixes a practical gap in how the corporate tax law worked. Previously, businesses knew tax credits and incentives existed, but the law did not clearly state which credits should be applied first. This created confusion, especially for companies with overseas income or complex tax structures.
The UAE introduced federal corporate tax at a standard rate of 9 per cent for financial years starting on or after June 1, 2023. Profits below Dh375,000 remain subject to a zero per cent rate. Since its rollout, the government has continued to refine the framework based on how it operates in real business situations.
The latest amendments are expected to improve transparency, reduce disputes, and help businesses better understand their corporate tax obligations. Further guidance from the Federal Tax Authority is expected to outline procedural details related to unused tax credit claims in the coming period.
