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Foreign Tax Credits under UAE Corporate Tax regime

Note: The Ministry of Finance (“Ministry”) has not released the final law on the Corporate Taxes as of today yet, however this is extracted from the Public Consultation Document on UAE Corporate Tax released by the Ministry of Finance, UAE and this needs to be re-confirmed with the final law to be issued by the Ministry before taking any decision.

 

What is the Tax Credit that will be available for the corporate tax paid in other countries on the taxable income in UAE under the UAE Corporate Tax regime? Can we carry forward the unutilised Tax Credit to next year?

 

UAE resident companies will be subject to UAE CT on their worldwide income, which includes foreign sourced income that may have been subject to tax of a similar nature to CT by another country.

 

To avoid double taxation, the UAE CT regime will allow a credit for the tax paid in a foreign jurisdiction against the UAE CT liability on the foreign sourced income that has not been otherwise exempted. This is known as “Foreign Tax Credit”.

 

The maximum Foreign Tax Credit available will be the lower of:

  • The amount of tax that is paid in the foreign jurisdiction; or
  • The UAE CT payable on the foreign sourced income.

 

Any unutilised Foreign Tax Credit will not be able to be carried forward or back to other tax periods, nor will the FTA refund any unutilised Foreign Tax Credit.

 

Reach out to Spectrum Auditing for further details. Call us today for any kind of assistance at +971 4 2699329 or email [email protected] to get all your queries addressed. Spectrum is your partner in your success.

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