UAE introduces adjustments and guidelines for taxable income calculation under Corporate Tax Law. The Corporate Tax Law has enhanced the importance of adjustments for accurate tax calculations in specific scenarios. It also described the implications and significance for businesses operating in the UAE.

Adjustments for Taxable Individual Conversion within the Qualifying Group Under UAE Corporate Tax Law:

• Governs transfers of assets or debts among taxable individuals within the same eligible group.
• Transferee’s estimate of taxable income may need adjustment.
• Excludes depreciation, amortization, or changes in asset/liability values related to gains/losses not yet recognized for tax purposes.
• Ensures accurate reflection of economic gains or losses.
• Aligns recognition with conditions for fairness and consistency.

Restructuring and Adjustments Under UAE Corporate Tax Law:

• Adjustments needed for transferring assets/liabilities resulting in business transfer.
• Excludes depreciation, amortization, or changes in asset/liability values related to unrecognized gains/losses.
• Ensures taxable income reflects economic gains or losses from business restructuring.
• Fosters accurate and consistent tax calculations.

Adjustments for Unincorporated Partnership Partners Under UAE Corporate Tax Law:

• Partners in unincorporated partnerships can exclude partnership-level income/losses from taxable income.
• Gains/losses from transferring partnership stake can be excluded from taxable income under specific conditions.
• Relief for partners, flexibility in recognizing partnership-level income/losses.

Changes to Deductions Under UAE Corporate Tax Law:-

• Only eligible expenses meeting criteria qualify for deductions.
• Non-deductible capital expenditures (e.g., depreciation, amortization) not allowed.
• Capital expenses not considered for taxable income can be written off against gains/losses upon asset/liability realization.
• Limits deductions, excludes non-deductible capital-related expenses.
• Ensures consistency and transparency in tax calculations.

Criteria for Choosing the REALIZATION Basis:

• Enterprises can choose realization basis for recognizing gains and losses.
• Accrual method users can recognize profits/losses on realization basis.
• Banks and insurance companies restricted to realizing gains/losses.
• Choice made during first tax period, final decision.
• Aligns tax recognition with financial reporting basis.
• Ensures reliability and accuracy in tax reporting.

Realization of an Asset or Liability:

• Certain transfers not regarded as realization for tax purposes (within taxable persons’ groups, transfers among individuals).
• Realization includes sale, disposal, transfer, settlement, and more.
• Definitions guide asset/liability realization for tax purposes.
• Ensures uniformity and consistency in recognizing taxable events.

Riaz Begum

I am an Advocate of the Supreme Court of Pakistan with over 18 years of experience in law. Holding Master’s degrees in English Literature and Political Science, I have a strong passion for reading, writing, and legal research. My professional journey includes extensive work with Farhat & Co. in the UAE, specializing in corporate and arbitration law, alongside a proven track record of handling complex legal matters both domestically and internationally.