The UAE has announced significant amendments to its corporate tax law, value-added tax (VAT) framework, and company regulations. It marks a major regulatory shift for businesses operating in the country. These amendments aim to make business operations simpler and strengthen the country’s business-friendly framework.
The change also allows taxable individuals the right to claim a payment in respect of unutilized tax credits arising from relevant incentives or reliefs, subject to specific conditions, timeframes, and procedures.
The new Decree-Law clarifies that the tax liability shall be settled sequentially as follows:
By utilizing the withholding tax credit balance due to the taxable person, as provided under Article (46) of the Law.
Where a balance of due corporate tax remains, the available foreign tax credit, as stipulated under Article (47), shall be utilised.
Should any corporate tax liability remain thereafter, any other balances or forms of incentives or reliefs determined pursuant to a decision issued by the Cabinet at the suggestion of the minister shall be utilised.
Any remaining corporate tax due after utilising the applicable credits and incentives shall be settled in accordance with Article (48) of the Law.
David Daly, partner at Gulf Tax Accounting Group, said: “The amendments clarify that not all tax allowances are equal.
The move outlines "the order in which allowances can be matched against taxable profits [and] entities should be aware that some might be limited in the value that can be deducted", he said. "Some might have a time bar within which they must be used."
“The amendments are less about introducing new concepts and more about fixing a gap in how the corporate tax law operates in practice,” said Ali Nawaz, senior manager - client accounting at Sovereign PPG, a business formation and support company.
The article authorizes the Federal Tax Authority to withhold amounts from corporate tax revenue and, where relevant, any top-up tax revenue for the purpose of settling the approved claims.
The update "strengthens transparency, improves administrative consistency, and shows that the UAE is refining its corporate tax framework based on how it actually works on the ground, not just how it was designed on paper,” Nawaz added.
The UAE Ministry of Finance introduced the federal corporate tax with a standard statutory rate of 9 per cent starting from the financial year beginning on or after June 1, 2023. The amendments stipulate that taxable people are relieved from issuing self-invoices when applying the reverse charge mechanism.
The regulation also establishes a five-year time limit for submitting requests to reclaim any excess refundable tax after reconciliation has taken place.