Website Last updated:

May 15, 2026

This guide clarifies the UAE Corporate Tax treatment of income derived from outside the UAE by Resident Persons, whose worldwide income falls under the scope of the law per Article 12. It explains key mechanisms for preventing double taxation, distinguishing between the Participation Exemption for foreign dividends under Article 23 and the elective Foreign Permanent Establishment exemption under Article 24. For non-exempt foreign income, it details the process for applying the Foreign Tax Credit under Article 47, outlining the calculation and eligibility conditions to mitigate international double taxation.

Taxation of Foreign Source Income

Corporate Tax Guide | CTGFSI1

November 2023

1. Glossary

2. Introduction

2.1. Overview
2.2. Purpose of this guide
2.3. Who should read this guide?
2.4. How to use this guide
2.5. Legislative references
2.6. Status of this guide

3. Relevance of foreign source income under the Corporate Tax Law

4. What is foreign source income?

4.1. Examples of foreign source income
4.2. Is income derived from a Free Zone Person foreign source income?
4.3. Is income derived by a Qualifying Free Zone Person from a Permanent Establishment foreign source income?

5. Who is subject to tax on foreign source income?

5.1. Resident Person under the Corporate Tax Law
1. 5.1.1. Juridical person
  5.1.2. Natural person
5.2. Non-Resident Person under the Corporate Tax Law
1. 5.2.1. Juridical person
  5.2.2. Natural person
5.3. Impact of Double Taxation Agreements on foreign source income

6. When does foreign source income become taxable in the UAE?

7. How is foreign source income taxed?

7.1. Determining Taxable Income
1. 7.1.1. Applicable Accounting Standards
  7.1.2. Cash Basis of Accounting
  7.1.3. Expenditure and losses relating to foreign source income
  7.1.4. Aggregation of foreign income and expenditure
  7.1.5. Income in foreign currency to be converted to AED
7.2. Exemptions of particular relevance for foreign source income
1. 7.2.1. Participation Exemption
  7.2.2. Foreign Permanent Establishment exemption
7.3. Determining Corporate Tax Payable

8. Foreign Tax Credit

8.1. What is Foreign Tax Credit?
1. 8.1.1. Foreign taxes for which Foreign Tax Credit is available
  8.1.2. When will foreign tax be considered as “paid”?
8.2. Who can claim Foreign Tax Credit?
8.3. How to calculate the Foreign Tax Credit
1. 8.3.1. General
  8.3.2. Unutilised Foreign Tax Credit
  8.3.3. Income-by-income approach: multiple sources of foreign income
  8.3.4. Scenarios where no Foreign Tax Credit is allowed
8.4. Timing mismatches
8.5. Impact of Double Taxation Agreements
8.6. Documentation

9. Updates and Amendments

Contents

Glossary