Foreign Tax Credit (FTC) Advisory
Foreign Tax Credit (FTC) Advisory
The Foreign Tax Credit (FTC) allows individuals to receive a credit for income taxes paid to a foreign government due to foreign income tax withholdings. This credit applies to anyone earning income from foreign sources, whether through employment or investments abroad.
In the GCC, the FTC is applicable in Kuwait and Oman. In Kuwait, the credit is available when permitted under the Double Taxation Avoidance Agreement (DTAA). In Oman, FTC approval is granted on a case-by-case basis by the Director of Taxation, even in the absence of a tax treaty with the source country.
At PTG Consultant Corporate Services, our tax experts offer comprehensive guidance through the process, including:
- Advice on claiming FTC under the relevant country’s tax laws and DTAAs
- Guidance on eligibility requirements and compliance/documentation obligations.
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What Is the Foreign Tax Credit Under UAE Corporate Tax?
If your UAE business earns income abroad that has already been taxed in another country, the UAE Corporate Tax Law allows a Foreign Tax Credit (FTC) so that the same income is not fully taxed twice. The credit is deducted from the UAE Corporate Tax payable on that income.
- The credit is limited to the lower of the foreign tax actually paid and the UAE Corporate Tax due on the same income
- Unused credits cannot be carried forward, carried back or refunded
- The foreign tax must be a tax on income of a similar nature to UAE Corporate Tax
- You must keep evidence of the foreign tax paid, such as withholding certificates or foreign tax assessments
How PTG Helps
- Identify foreign-source income and the foreign taxes that qualify
- Apply treaty rates first, so you do not claim credit for tax that should have been reduced
- Calculate the FTC limit income stream by income stream
- Prepare supporting schedules and documents for your Corporate Tax return
- Review whether exemptions (for example, for qualifying dividends or foreign permanent establishments) give a better outcome
Frequently Asked Questions
Can the foreign tax credit create a refund?
No. The FTC can reduce the UAE Corporate Tax on the relevant income to zero, but any excess foreign tax is not refunded or carried forward.
Is foreign withholding tax on service fees creditable?
It can be, if it is a tax on income and was correctly withheld. We check the treaty position and documentation before the claim.
Earning income outside the UAE?
Speak to an FTA-registered tax agent. Free 15-minute initial consultation.
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