Answer:
Yes. A Foreign Tax Credit is available under UAE corporate tax law for foreign taxes paid on income that is also subject to UAE Corporate Tax (Federal Decree-Law No. 47 of 2022, Article 46, Article 47). This includes withholding taxes and similar income-based foreign taxes.
Key Conditions:
• The credit is limited to the lower of the foreign tax paid and the UAE corporate tax due on the same income.
• Excess credits cannot be carried forward or back to another Tax Period.
• The taxable person must retain records supporting the claim for credit.
Refunds:
If withholding tax credits exceed UAE corporate tax liability, a refund may be requested in line with Article 49 of the Decree-Law.
Example:
If AED 20,000 of foreign tax is paid on income also taxed in the UAE at AED 15,000, the UAE tax due may be reduced by up to AED 15,000, but not more. The excess AED 5,000 cannot be carried over to another year.