Corporate Tax Filing in the UAE: A Comprehensive Guide for Business Owners
19/11/2025
YOUNG AND RIGHT ACCOUNTING & TAX CONSULTANCY
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If your UAE company earns income abroad—say dividends from Germany, interest from Singapore, or royalties from a market with no treaty—you can end up paying tax twice: once overseas and again in the UAE. The Foreign Tax Credit (FTC) under the UAE Corporate Tax regime is designed to solve exactly that problem. It lets a UAE taxpayer claim a foreign tax credit for foreign income tax paid on the same item of foreign-source income, offsetting UAE Corporate Tax that would otherwise be due on the relevant foreign source income stream. The goal is simple: reduce their corporate tax liability so the same profit isn’t taxed twice.
This definitive guide from Young & Right—an accounting and tax consultancy in Dubai—explains how the FTC works under Federal Decree-Law No. 47 of 2022 (the UAE Corporate Tax Law), how it fits with the UAE’s 130+ Double Taxation Agreements (DTAs), which taxes qualify (and which don’t), the documentary evidence to keep, and step-by-step examples (Germany, France, Singapore, and a non-DTA country) that show why the cap often matters more than anything else in planning your global tax position.
The FTC exists to prevent double taxation on foreign income. It’s grounded in Federal Decree-Law No. 47 of 2022 and EmaraTax, aligned with OECD principles, and applied via the UAE’s 130+ DTAs using exemption or credit methods.
→ Legal basis :
The FTC mechanism flows directly from Federal Decree-Law No. 47 of 2022 (the UAE corporate tax system), associated guidance, and return mechanics in EmaraTax.
→ Policy alignment :
The regime aligns with OECD principles for international tax coordination that prevent double taxation—typically by using either an exemption or credit approach.
→ Treaty network :
With 130+ DTAs, the UAE’s treaties generally offer either:
an exemption method (the UAE exempts the income), or
a credit method (the UAE taxes the income but allows a tax credit in UAE corporate tax for foreign government income tax paid).
The foreign tax credit in UAE allows a UAE taxable person to credit a foreign income tax (or a tax in lieu of income tax) paid to a foreign jurisdiction on the relevant foreign income against the amount of UAE Corporate Tax on that same income. In other words, the credit reduces the amount of corporate tax that would otherwise be payable in the UAE.
The credit is limited to the amount of UAE corporate tax that would be due on the relevant income. If the foreign tax exceeds the UAE CT on that income, the excess foreign tax credit (i.e., the unused foreign tax credit) cannot be refunded, cannot be carried back, and cannot be carried forward to future tax periods. Put simply: foreign tax credit cannot exceed the UAE allows cap determined at the 9% rate applied to the taxable income piece you’re crediting.
If foreign tax < UAE CT, you credit the foreign tax and pay the tax due on the foreign income difference in the UAE.
If foreign tax ≥ UAE CT, the UAE CT on that item drops to zero, but unutilized foreign tax credit (the excess) is lost for UAE purposes, there is no official tax refund of the excess and no carry-forward of unutilised foreign tax credit.
Income types commonly in scope (when subject to UAE corporate tax, i.e., not exempt from UAE corporate tax):
Dividends from foreign companies.
Interest on foreign debt instruments.
Royalties from licensing IP to foreign users.
Profits of foreign permanent establishments (PEs)/branches.
The income must be derived from a foreign source and subject to UAE CT. If the income is exempt in the UAE (e.g., participation exemption for qualifying dividends or an exemption for a qualifying PE), there is no UAE CT payable on that income—hence no credit in UAE corporate tax to claim.
Before claiming an FTC, separate what counts from what doesn’t: only income-type taxes on the same income and period are creditable..
→ Qualifying:
An amount of tax that is an income tax (or tax in lieu of income tax) imposed by a foreign tax authority on the same income for the same tax period.
→ Not qualifying:
VAT/GST, sales tax, payroll tax, customs duties, and excise—these are not income taxes and must not be counted in credit calculations.
To substantiate the tax credit, keep a coherent document pack that clearly ties the tax payment to the foreign source income:
Foreign tax returns or assessments that show how the amount of foreign tax was computed.
Official payment receipts (or equivalents) proving the tax payment was made to the foreign tax authority.
Withholding certificates, contracts, invoices, bank proofs, and any relevant tax schedules linking the withholding tax or assessed tax to the same item of income reported in the UAE.
Internal reconciliations to your general ledger, so your tax position is clear if reviewed.
These records are essential for UAE businesses both when filing and if queried by the FTA.
Assume the income is fully taxable in the UAE at 9%, ignore other adjustments, and assume correct FX conversion and timing with solid tax receipts and documentation.
Germany’s rate exceeds 9%, so the UAE CT is fully offset; the extra 6% is unused foreign tax credit in the UAE context.
The foreign tax is lower than the UAE CT due; you minimize tax by crediting AED 50,000 but still pay AED 40,000 in the UAE.
High foreign tax rate neutralizes UAE tax, but the excess foreign tax credit is unutilised.
Even without a treaty, the domestic international tax credit helps, but you are still capped at the UAE rate.
Claiming an FTC in the UAE is a structured, evidence-led process.
Identify foreign source income streams (dividends, interest, royalties, PE profits) and test if they are subject to UAE corporate tax or exempt from UAE corporate tax. The tax position drives whether an FTC exists.
For each stream and foreign jurisdiction, record exactly what amount of foreign tax was charged, by whom, on what, and when. Keep withholding statements, assessments, official tax receipts, and contracts to prove the amount of tax relates to the same income and tax period.
If exemption applies, no tax due on the relevant UAE computation and no credit. If credit method applies, compute the domestic FTC and apply the UAE corporate tax liability cap.
Calculate UAE CT on the relevant income at 9%, then set the amount of foreign tax credit equal to the minimum of the foreign income tax and the calculated UAE CT. Do this per jurisdiction and/or per category as required; credit is limited to the UAE tax due on the foreign source income you’re taxing.
Disclose the foreign income, the foreign tax paid, and the credit calculations in your UAE return. Maintain a tidy document pack for information requests—this is vital to your tax obligations.
Ensure the UAE return ties to foreign statements, tax receipts, and ledgers. Mismatches can delay assessments and raise questions about your tax impact.
Crediting non-income taxes. Only income tax or a tax in lieu qualifies.
Claiming a credit on exempt income. No UAE tax means no credit.
Double claiming. Don’t combine exemption and credit on the same item.
Poor documentation. Missing official tax proofs or mismatched ledgers derail claims.
Incorrect segmentation. Compute by jurisdiction/income as required so the tax due on the relevant income matches the credit.
Ignoring the cap in forecasts. Always model the 9% cap at the UAE rate early to see the tax burden and any unutilized foreign tax credit.
For UAE groups, cross-border income is the norm. The foreign tax credit (FTC) under UAE corporate tax is straightforward in concept yet technical in execution: it requires correct treaty interpretation, clean mapping of relevant foreign income, accurate country schedules, and tight control over the amount of UAE Corporate Tax so you neither over-claim nor under-claim. Errors here can inflate tax liabilities, weaken your tax position, and attract FTA scrutiny.
Treaty analysis & domestic mapping: We determine, per stream of foreign-source income, whether exemption or credit applies and align treatment with UAE law.
Forecast modelling: We quantify potential excess foreign tax credit so you can renegotiate terms, add gross-up clauses, or pursue tax planning via treaty-efficient routes.
Return preparation (EmaraTax): Clear, jurisdiction-wise credit calculations by income type, reconciled to your ledger, so the UAE return reflects the precise credit permitted.
Defensible documentation: Comprehensive packs with official tax acknowledgments and tax receipts to support claims in any FTA query.
Governance playbooks: Practical controls and checklists your finance team can run each tax period to repeat accurate outcomes.
Getting the foreign tax credit right is equal parts technical law and meticulous bookkeeping. Young & Right’s specialist tax consultants turn complexity into a repeatable workflow—so you’re not overpaying globally and your uae corporate tax due is precisely calculated. Here’s how we help with understanding foreign tax credit and claiming foreign tax credit—end to end.
We map every foreign-source stream (dividends, interest, royalties, PE profits) and confirm whether corporate tax due arises in the UAE. If an item is exempt, there’s no credit to compute; if taxable, we proceed to the credit rules.
We assemble a clean document pack: assessments, withholding certificates, payment proofs, and contracts—showing that the tax in the foreign jurisdiction is an income tax (or in lieu) on the same item. The tax must clearly tie to the income you’re reporting in the UAE.
We determine whether a DTA gives exemption or credit. When using the credit method, we apply the domestic rule that the credit is capped at the amount of UAE corporate tax due on that same income—no refunds and no carry-forwards of any excess.
We calculate the allowable credit by country and income category, quantify leakage where foreign rates exceed 9%, and model alternatives (pricing, gross-up clauses, routing) to reduce uncreditable cost.
We prepare disclosures, attach schedules that reconcile to your ledger, and ensure the FTC figures align with return mechanics—so the uae corporate tax due reflects the exact credit permitted.
If the FTA asks, we respond with consistent schedules and evidence. Then we hand over a playbook your finance team can run every year.
The UAE’s FTC is a precise, rules-based fix to corporate tax on foreign income being taxed twice. Under Federal Decree-Law No. 47 of 2022, you can claim a foreign tax credit against UAE Corporate Tax for qualifying withholding tax or assessed income tax paid overseas—capped at the UAE liability on that income. There is no refund and no carry-forward of unutilised foreign tax credit, and the FTC does not change taxable income or create a tax loss. Combine the FTC with the UAE’s DTA network and thoughtful tax planning, and you can manage your tax burden efficiently across borders—provided your credit is available on the tax due on the relevant income and your documentation is rock-solid.
For precise advice tailored to your structure, speak with Young & Right—your expert corporate tax partner in Dubai.
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