UAE simplifies corporate tax rules and allows refunds on unused credits

Dubai: The UAE government has issued a new Federal Decree-Law amending key provisions of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, introducing clearer mechanisms for calculating and settling corporate tax obligations. The latest changes also establish a formal process for businesses to claim refunds for unutilised tax credits derived from eligible incentives and reliefs.

According to the amendment, the calculation and settlement of corporate tax will follow a defined sequence that prioritises the use of available credits and incentives before any remaining liabilities are settled. The tax liability will first be offset by the withholding tax credit balance under Article 46 of the law.

If a balance remains, businesses can apply the available foreign tax credit in accordance with Article 47. Any further reductions will then be applied using other approved incentive or relief balances as may be specified by the Cabinet based on recommendations from the Minister of Finance.

Once all applicable credits are used, any remaining corporate tax due must be paid in accordance with Article 48 of the existing law.

A key feature of the amendment is the introduction of a new article allowing taxable entities to claim payments for unutilised tax credits resulting from approved incentives or reliefs. This provision will be subject to specific conditions, timeframes, and administrative procedures outlined in a Cabinet decision to be issued upon the Minister’s recommendation.

The change provides businesses greater flexibility in managing tax positions, while allowing them to monetise portions of tax benefits that remain unutilised after offsetting liabilities.

The updated provisions grant the Federal Tax Authority (FTA) the authority to manage and disburse approved tax credit claims. The FTA may withhold amounts from corporate tax revenues, and where applicable, from top-up tax collections to fund legitimate refund claims, following a decision by its Board of Directors.

The amendments also support the broader objective of maintaining a business-friendly environment while ensuring fiscal governance and compliance remain robust.

The new Federal Decree-Law takes immediate effect upon publication in the Official Gazette, with implementing decisions expected in the coming months to clarify timelines and qualification criteria for credit-based claims.