The United Arab Emirates has introduced significant amendments to its Corporate Tax Law framework, aimed at clarifying tax settlement procedures and giving businesses new flexibility in handling tax credits and incentives. These changes were made through a Federal Decree‑Law amending provisions of Federal Decree‑Law No. 47 of 2022 on the Taxation of Corporations and Businesses, marking a key evolution in the relatively new UAE corporate tax regime.  

UAE Corporate Tax: Why the Amendments Matter? 

Since the UAE first introduced a federal corporate tax regime, businesses have sought clearer guidance on how the system handles tax credits, incentives, and reliefs, especially when these interact with multiple forms of tax liabilities. The latest amendments address this by establishing a precise sequence for settling tax obligations and by introducing a formal refund mechanism for unused credits from approved incentives. 

This initiative reflects the UAE’s ongoing efforts to enhance transparency and certainty in its UAE corporate tax laws, while maintaining a business‑friendly environment that supports investment and economic activity.  

Streamlined Corporate Tax Settlement Rules 

One of the most important changes clarifies how businesses should settle their UAE corporate tax liabilities when tax credits and incentives apply. 

Under the amended provisions: 

• First, any corporate tax owed must be offset against the taxpayer’s withholding tax credit balance, as defined under Article 46 of the Corporate Tax Law.  

• Second, if any taxable amount remains after using withholding credits, taxpayers must apply available foreign tax credits in line with Article 47. 

• Third, any further reductions may be applied using other incentives or reliefs approved by the Cabinet, based on a proposal from the Minister of Finance.  

• Only after all applicable credits and reliefs are used must the remaining tax be paid under Article 48.  

This defined offset order provides certainty to businesses on how their tax positions are calculated and settled, particularly for companies benefitting from multiple incentives or carrying forward credits.  

Refunds for Unused Tax Credits in UAE Corporate Tax 

Perhaps the most transformative part of the amendment is the introduction of a refund mechanism for unused tax credits arising from approved incentives or reliefs: 

• Taxable persons may now claim payments for tax credits that remain unused after all applicable offsets have been applied. This means that credits which cannot currently be applied to settle tax liabilities could be monetized, rather than forfeited.  

• These refund claims will be governed by conditions, deadlines and procedures to be prescribed by a Cabinet decision, ensuring that the system remains orderly and transparent. 

This change is expected to significantly improve liquidity and planning flexibility for businesses, particularly those operating in sectors that benefit from generous incentive programs.  

Role of the Federal Tax Authority 

To operationalize these changes, the amendments also expand the Federal Tax Authority’s (FTA) powers: 

• The FTA is authorized to manage and disburse approved refund claims.  

• It may also withhold amounts from UAE corporate tax revenues – and where applicable, from top‑up tax collections – to satisfy legitimate refund claims, as determined by its Board of Directors.  

This development positions the FTA at the centre of administering the new credit refund framework and ensures that refundable liabilities are processed in a controlled and predictable manner. Gulf Business 

Impact on Businesses and Tax Planning 

The amendments are anticipated to have a noticeable impact on corporate tax planning and compliance: 

• Clarity and certainty: The defined settlement order eliminates ambiguity in dealing with multiple credits and incentives.  

• Cash‑flow benefits: Companies that previously could not utilize all credits within a tax period may now convert these into refunds, enhancing cash flow and investment capacity. 

• Administrative timelines: Implementation details – including eligibility criteria and administrative steps – will be elaborated in subsequent Cabinet decisions, giving businesses time to adjust.  

Overall, these amendments reflect the UAE’s commitment to balancing fiscal governance with a tax regime that supports competitiveness and economic growth. 

How MS Can Help with UAE Corporate Tax? 

Managing UAE corporate tax requires expertise and precision. MS provides end-to-end support to ensure compliance, optimize tax positions, and maximize incentives. 

Key Services: 

• Advisory & Planning: Expert guidance on corporate tax obligations, tax-efficient structures, and utilization of incentives and foreign tax credits. 

• Compliance & Filing: Accurate preparation and filing of tax returns, registration, and account reconciliation in line with FTA requirements. 

• Credit Management & Refunds: Assistance with applying tax credits, claiming refunds, and liaising with the FTA. 

• Audit & Dispute Support: Preparing for audits, managing disputes, and reducing exposure to fines or penalties. 

• Strategic Insights: Evaluating the tax impact on transactions, restructurings, and business decisions to enhance cash flow and efficiency.