Definition

A Foreign Tax Credit allows UAE businesses to reduce their UAE Corporate Tax liability by the amount of tax already paid in another country on the same income.

Key points

• Prevents double taxation on foreign-sourced income.
• Credit limited to the amount of UAE Corporate Tax payable on that income.
• Requires supporting evidence, such as foreign tax assessments or receipts.
• Claimed through the annual corporate tax return.

Practical example

A UAE company earns AED 500,000 from a project in India and pays AED 40,000 in Indian tax. When filing in the UAE, it can offset AED 40,000 as a foreign tax credit against its UAE Corporate Tax.

Why it matters

Helps businesses with international income avoid paying tax twice and comply with double taxation treaties.