The UAE has announced updates to its corporate and business tax regulations, introducing revised rules aimed at improving clarity, strengthening compliance, and aligning the tax framework with evolving economic and commercial practices.
UAE Introduces Changes to Corporate and Business Tax Regulations.
The UAE authorities on Monday, December 15, confirmed the introduction of a set of updates to the legislation governing corporate and business taxation. These revisions form part of the country’s ongoing efforts to refine its tax framework, ensuring greater transparency, consistency, and ease of compliance for businesses operating across the Emirates. The amendments were announced through a new decree that revises specific provisions of the existing law, with a particular focus on technical clarity rather than changes to tax rates.
One of the key elements addressed in the updated decree relates to how corporate tax liabilities are calculated and settled when companies make use of available incentives, exemptions, or reliefs. The amendments provide clearer guidance on the treatment of carried-forward relief balances and the process businesses must follow when applying these benefits against their taxable income. This clarification is intended to reduce uncertainty for companies when determining their final tax obligations.
Officials indicated that the changes aim to streamline the tax calculation process, ensuring that incentives and relief mechanisms are applied in a consistent and predictable manner. By outlining how these balances should be utilised and offset, the decree helps businesses better understand how their tax positions are affected over time, particularly for entities that benefit from transitional reliefs or sector-specific incentives.
The revised provisions are also expected to support smoother tax administration by minimising disputes and misunderstandings between taxpayers and authorities. Clearer rules around settlement procedures can help companies plan their finances more effectively, while also enabling tax authorities to process filings and payments with greater efficiency.
Overall, the amendments reflect the UAE’s broader commitment to maintaining a competitive and business-friendly tax environment while upholding international best practices. By refining the legal framework and addressing practical issues related to tax computation and settlement, the government aims to support compliance, improve certainty for investors, and strengthen confidence in the country’s evolving corporate tax system.
The amendment further grants taxable persons the ability to request a payout for tax credits that remain unused and originate from eligible incentives or relief programmes. This entitlement, however, is not automatic and will be governed by defined criteria, deadlines, and formal processes set out by the authorities. Taxpayers seeking to benefit from this provision must comply with the prescribed requirements, ensuring that claims are submitted within the approved time limits and in accordance with established procedures. The measure is designed to offer greater flexibility while maintaining regulatory oversight and accountability.
The recently issued Decree-Law provides clearer guidance on how corporate tax obligations are to be settled, outlining a specific order in which available credits, incentives, and reliefs must be applied. This structured approach is intended to remove ambiguity and ensure consistency in how taxable persons offset their liabilities under the corporate tax regime.
Under the clarified framework, the first step in settling any corporate tax due is the application of the withholding tax credit balance that is owed to the taxable person. This credit, which is addressed under Article 46 of the law, must be used before any other forms of relief are considered. By prioritising withholding tax credits, the decree ensures that taxes already deducted at source are appropriately recognised and offset against the final tax obligation.
If, after applying the withholding tax credit, there is still an outstanding amount of corporate tax payable, the next step involves using any foreign tax credits available to the taxable person. As set out under Article 47, foreign tax credits allow businesses to reduce their UAE tax liability in respect of taxes paid on income earned outside the country. The decree confirms that these credits should only be applied once withholding tax credits have been fully utilised.
In cases where a corporate tax balance remains even after both withholding and foreign tax credits have been applied, the Decree-Law permits the use of additional incentives or reliefs. These may include other credit balances or benefits approved by the Cabinet, following a recommendation from the Minister. Such incentives or reliefs could be introduced to support specific sectors, activities, or economic objectives, and their application would follow the criteria set out in the relevant Cabinet decision.
By establishing this clear sequence for settling tax liabilities, the Decree-Law aims to improve transparency, simplify compliance, and provide businesses with greater certainty when calculating and paying their corporate tax.
The Decree-Law further outlines the final step in the process for settling corporate tax obligations. It specifies that if a taxable person still has an outstanding corporate tax liability after all applicable credits, incentives, and relief mechanisms have been fully applied, the remaining amount must be paid in line with the provisions set out under Article 48 of the Law. This article governs the standard procedures for settling unpaid tax, ensuring that any residual liability is addressed through the established payment and compliance framework.
By clearly defining this final stage, the amendment ensures that there is a complete and orderly pathway for the settlement of corporate tax dues. Taxable persons are therefore able to understand not only how credits and incentives are to be applied, but also what steps must be taken once those options have been exhausted. This clarity is expected to reduce confusion, support accurate tax planning, and help businesses meet their obligations in a timely and compliant manner.
In addition to clarifying settlement procedures, the Decree-Law introduces a new provision that strengthens the operational role of the Federal Tax Authority (FTA). Under the newly added article, the FTA is granted the authority to retain certain amounts from corporate tax collections. Where applicable, this power also extends to any top-up tax revenues that may be collected under the corporate tax framework. The retained amounts are intended to be used specifically for settling approved claims owed to taxable persons.
The utilisation of these retained funds will be subject to formal approval and oversight. Any such action must be carried out in accordance with a decision issued by the Board of Directors of the Federal Tax Authority. This ensures that the process remains transparent, well-governed, and aligned with regulatory requirements. By granting the FTA this authority, the amendment aims to improve administrative efficiency and ensure that approved claims can be settled more effectively, without unnecessary delays.
Overall, these additions reinforce the UAE’s commitment to maintaining a robust, well-structured corporate tax system. By clarifying payment obligations and empowering the tax authority with clearly defined administrative tools, the Decree-Law supports both compliance and fairness within the corporate tax framework.
