**Foreign Tax Credit (FTC)** is a statutory relief mechanism under **Article 47** of the Corporate Tax Law designed to prevent the same income from being taxed twice—once in a foreign jurisdiction and once in the UAE.
The "Lesser Of" Rule
The amount of Foreign Tax Credit available for a relevant Tax Period is strictly capped. Under the 2026 audit framework, the allowable credit is the **lower of**:
- The actual tax paid to the foreign government on that specific income.
- The UAE Corporate Tax due on that same portion of foreign-sourced income.
Sequential Settlement
As per the **December 2025 Amendments**, tax liabilities must be settled in a precise sequence: First, utilize Withholding Tax Credits (Art. 46), then apply available Foreign Tax Credits (Art. 47).
Use It or Lose It
Any unutilized FTC cannot be carried forward to future tax periods or carried back to previous years. If your foreign tax (e.g., 15%) exceeds the UAE rate (9%), the excess 6% simply expires.
Forensic Documentation Requirements
To claim an FTC, the FTA requires "Irrefutable Proof of Payment." In a 2026 audit, this includes:
- • Official tax receipts or withholding certificates from the foreign authority.
- • Certified copies of the foreign tax return and income calculations.
- • Evidence that the foreign tax is a tax on *profits* (not VAT or Sales Tax).
"The FTC is a precision tool, not a general refund. If the foreign income is already exempt under the Participation Exemption, no credit can be claimed for foreign taxes paid on that same income."
— Arakan Statutory Intelligence Brief