The UAE has introduced key amendments to its corporate tax regime, allowing businesses to claim payments for unused tax credits, a move aimed at enhancing cash flow flexibility and improving clarity in tax settlement processes.
The changes have been implemented through a new Federal Decree-Law amending Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, establishing a structured mechanism for the calculation, settlement, and potential refund of unutilised tax credits.
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Tax Credits and Incentives Take Priority
Under the updated framework, corporate tax calculations will follow a defined sequence that prioritises the use of available tax credits, incentives, and reliefs before any remaining tax liabilities are settled. This ensures that businesses fully benefit from eligible incentives before making additional tax payments.
Corporate tax liabilities will first be offset against available withholding tax credits, in line with existing provisions. Where tax remains payable, further reductions may be applied using other approved incentives or relief balances, subject to Cabinet decisions issued upon the recommendation of the Minister of Finance.
Only after all applicable credits and incentives have been utilised will any remaining corporate tax be settled.
Introduction of Refunds for Unused Tax Credits
A central feature of the amendments is the introduction of a new provision allowing businesses to claim payments for unutilised tax credits arising from approved tax incentives or reliefs. This effectively enables companies to monetise qualifying tax benefits that remain unused after offsetting corporate tax liabilities.
Such claims will be subject to eligibility criteria, prescribed timelines, and administrative procedures, which are expected to be clarified through forthcoming Cabinet and ministerial decisions.
Expanded Role of the Federal Tax Authority
The amendments formally empower the Federal Tax Authority (FTA) to administer and disburse approved payment claims related to unused tax credits. The FTA may settle valid claims by withholding amounts from corporate tax revenues or, where applicable, from top-up tax collections, subject to approval by the Authority’s Board of Directors.
This enhanced role strengthens administrative oversight while ensuring a clear and consistent process for businesses seeking to claim eligible refunds.
Supporting a Business-Friendly Tax Environment
The changes align with the UAE’s broader objective of maintaining a competitive and business-friendly tax environment, while reinforcing fiscal governance, administrative clarity, and compliance certainty for companies operating under the corporate tax regime.
The new Federal Decree-Law takes effect immediately upon publication in the Official Gazette, with further implementing decisions expected in the coming months to define qualification criteria, application procedures, and timelines.
