Elimination of Taxes Paid 

1)   Introduction

In the globalized economy, the issue of corporate double taxation of income is unequivocal. However, a relief for taxes paid in the foreign country is given to taxpayer while taxing the same income in the UAE and this is termed as Foreign Tax Credit (FTC).

We have outlined below the concept of FTC and various tax relief methods practiced globally.

2)   Methods

Tax Credit Method

• Income taxed in the source country is also subject to tax in the resident country. But, deduction is allowed from its taxes paid in the source country.

Exemption Method

• Income that is taxed in the foreign country is exempted in the resident country either fully or progressively.

3)   FTC in the UAE

Availability

• The UAE Corporate Tax (CT) regime allows credit for taxes paid in foreign country on foreign-sourced income subject to taxes in the UAE.

Limitations

• The FTC shall be lower of the below:
• Foreign tax paid
• UAE CT liability
• Unused FTC cannot be carried forward or back

4)   Eligibility

• Must be a tax resident
• Taxes must have been paid in accordance with the relevant tax treaty and domestic law of foreign jurisdiction
• Foreign taxes paid must be income taxes/ taxes levied on income, profits, or gains.
• Subject to any other conditions as may be set out in an applicable tax treaty.

5)   Documentation

• Proof of foreign taxes paid
• Documentation to show residency status
• Tax returns filed in the foreign jurisdiction
• Any other document prescribed by the Federal Tax Authority

6)   How can Crowe help?

• Analyzing the eligibility for any tax credit available under the provisions of tax treaties and domestic law.
• Ongoing review and providing recommendations to ensure tax compliance.
• Advising on the documentation and supporting evidences for verification by the FTA.
• Assistance in computing the FTC in accordance with the provisions of the UAE CT Law.