The UAE government has issued amendments to the corporate tax law, adding to a series of legal reforms announced in recent days. The changes aim to clarify how corporate tax is calculated and settled when tax credits or other incentives and reliefs apply, the UAE Government Media Office said in a statement on Monday.
The decree grants taxpayers the right to request payments for unused tax credits, subject to specific timelines and procedural requirements. The amendments clarify that corporate tax liabilities must be settled sequentially. First, any balance of withheld tax credit due to the taxpayer must be applied. If corporate tax remains payable, any available foreign tax credit is then used. If a balance is still outstanding, remaining credits, other incentives, or reliefs approved by the Cabinet are applied.
Any residual corporate tax after all credits and incentives have been utilised must be paid. David Daly, partner at Gulf Tax Accounting Group and a contributor to The National, explained that the amendments clarify that not all tax reliefs are equal. The decree defines the order in which reliefs can be offset against taxable profits, and organisations need to be aware that some may be limited in value or subject to time restrictions on use.
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Amendments close gaps in the practical application of corporate tax
Ali Nawaz, senior client accounting manager at Sovereign PPG, a corporate services and business support firm, noted that the amendments are less about introducing new concepts and more about closing gaps in how the corporate tax law operates in practice. Until now, businesses were aware of the existence of withheld tax credits, foreign tax credits, and incentives, but the law largely remained silent on the order in which they should be applied. For those following property news today, this may sound technical, but in reality, it created genuine uncertainty, particularly for groups with foreign income or complex tax positions.
Different interpretations could easily lead to different outcomes. Changes in tax legislation affect the financial planning of startups, small firms, and large companies that lease commercial space through a lease for rental agreement, as landlords’ tax obligations are often factored into rental pricing. The decree also introduces a new article allowing taxpayers to claim payments for any unused tax credits arising from incentives or reliefs, subject to prescribed conditions, timelines, and procedures.
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The article further authorises the Federal Tax Authority to deduct amounts from corporate tax revenues and, where applicable, any additional tax revenues to settle approved claims. Daly suggested this provision relates to withholding tax. While it currently exists at a zero percent rate, he believes the foundations are being laid for how withholding tax will interact with corporate tax in the future. Nawaz emphasised that the amendments remove ambiguity by:
- strengthening transparency in the tax system
- improving administrative consistency
- demonstrating that the UAE is refining its corporate tax framework based on real-world practice, not just theoretical design
The UAE introduced a federal corporate tax at a standard rate of 9 percent for financial years starting on or after June 1, 2023. Corporate income exceeding 375,000 dirhams ($102,110) falls within the taxable bracket, while taxable profits below this threshold are subject to a zero percent rate. Earlier this month, the Ministry of Finance also announced plans to amend value-added tax rules to simplify tax procedures starting next year. The changes will exempt taxpayers from issuing self-invoices under the reverse-charge mechanism and introduce a five-year deadline for submitting claims to recover any excess refundable tax after reconciliation.
