Page 8 - ICAI UAE TAX UPDATE_AUGUST 2024

• The de minimis threshold of AED 12 million. Tax credits
• Taxable Persons may be entitled to credits which they
The General Interest Deduction Limitation Rule does not can use to offset against their Corporate Tax liability.
apply to Banks, insurance Providers & natural persons These credits arise if they have paid tax on the same
undertaking business. income already, either in the UAE or in a foreign country.

The finance element of finance lease and non-finance The UAE has introduced a Withholding Tax that applies
lease payments shall be considered as Interest for the to certain categories of income paid to a Non-Resident
purposes of the General Interest Deduction Limitation Person to the extent the income is not attributed to a
Rule. All foreign exchange gains and losses accruing Permanent Establishment in the UAE. No such categories
from Interest shall also be considered as Interest for the have been prescribed so far and the rate of this tax is
purposes of the General Interest Deduction Limitation 0%, meaning that, currently, no tax is to be withheld.
Rule.
Where an amount that is deemed to be Interest is Foreign Tax Credit
capitalised in the accounts of the Taxable Person, the
income and expenditure attributable to such capitalised • Foreign Tax Credit is the amount of foreign taxes paid
Interest amount shall be subject to the General Interest on foreign source income which has not been exempted.
Deduction Limitation Rule. A Foreign Tax Credit under Article 47 of the Corporate Tax
Law is allowed even if foreign tax is paid in a jurisdiction
Specific Interest Deduction Limitation Rule with which the UAE does not have a Double Taxation
No deduction is allowed for Interest expenditure incurred Agreement.
on a loan obtained, directly or indirectly, from a Related
Party in respect of any of the following transactions: • To claim a Foreign Tax Credit, the pre-tax foreign source
income must be included in the Taxable Income of the
• Dividend or profit distribution to a Related Party, Taxable Person.

• a redemption, repurchase, reduction or return of share • An unutilised Foreign Tax Credit will be forfeited.
capital to a Related Party, Further, a Corporate Tax deduction for the unutilised
Foreign Tax Credit is not possible. No refund will be
• a capital contribution to a Related Party, or the given for unutilised Foreign Tax Credit.
acquisition of an ownership Interest in a Business that
is, or becomes, a Related Party following the acquisition. • Foreign Tax Credit can only be applied after any
Withholding Tax Credit has been applied
The purpose of this provision is to prevent the
Corporate Tax base from being eroded by transactions Taxation of Non-Resident Persons
and arrangements between Taxable Persons and their
Related Parties. • A Non-Resident Person is subject to Corporate Tax in
the UAE if it conducts Business in the UAE through a
Tax loss Permanent Establishment or derives State Sourced
income from the UAE or derives income through a
• A Taxable Person that has incurred a Tax Loss will be nexus (i.e. Immovable Property situated in the UAE) in
able to use the Tax Loss to reduce its Taxable Income in the case of a juridical person.
future Tax Periods.
• A single Taxable Person may transfer their Tax Losses
to more than one Taxable Person provided that in each
case the relationship of the recipient Taxable Person with
the Taxable Person transferring their Tax Losses meets
the relevant conditions.

• The Tax Loss carried forward can be used to reduce
the Taxable Income in the subsequent Tax Periods by
a maximum of 75% of that Taxable Income. A Taxable
Person must first utilise its own brought forward Tax
Losses before it can utilise a Tax Loss transferred to it.
8 www.icaidubai.org

UAE TAX UPDATE NEWSLETTER ISSUE 05 - August 2024