Adjustments Applicable on UAE Corporate Tax
The UAE government has launched a new era with its corporate tax system. This tax system started in June 2023 and made every business in UAE follow a new set of rules. Now, companies pay a 9% tax on profits above AED 375,000. To stay in line with the law, businesses must know the adjustments they need to make when they calculate their UAE corporate tax.
Understanding the Key Adjustments for UAE Corporate Tax
A company must start with its financial statements, made as per UAE accounting standards. The real taxable income needs several adjustments. Businesses must check each adjustment when they fill out their tax forms.
Realized and Unrealized Gains or Losses
A business should add any gains or losses from assets, whether sold or just changed in value. For example, if a company owns a building and the value goes up or down, it must count this change in its tax calculations. Realized gains mean a sale happened, while unrealized gains mean the asset’s value changed but wasn’t sold.
Depreciation, Amortisation, and Value Changes
Every business should keep in mind the rules for depreciation and amortisation. If an asset loses value, the company should only deduct the amount up to the original cost. If the value loss is bigger, that extra part can’t be used to lower taxes. This rule helps companies keep their taxable income fair and in line with the law.
Related Party Transactions
Businesses in UAE often transfer assets between a parent company and a subsidiary. These are called related party transactions. When this happens, companies must set the value as if they sold it to someone not related to them. This is called the arm’s length principle. It stops companies from changing prices to pay less tax.
Transitional Rules Adjustments
UAE made special rules for companies moving into this new tax era. These are called transitional rules. They help companies switch smoothly from the old system to the new one. Under these rules, companies can adjust for things like:
- Qualifying immovable property (like buildings)
- Qualifying intangible assets (like trademarks)
- Qualifying financial assets
- Qualifying financial liabilities
To adjust, a company must prove the asset was owned before its first tax period, is valued by historical cost, and was sold after the tax started. For financial assets and liabilities, only the first two points must be true.
Adjustments for Exempt Income and Incentives
Some income is exempt from tax, and businesses need to remove it from their taxable income. Also, the government sometimes gives relief or incentives, and companies need to adjust for those when they file their taxes.
Intra-Group Transfers
Companies in the same group can move assets or liabilities to each other. If the group owns at least 75% of each company, they can transfer things without counting gains or losses for tax. But the assets or liabilities must stay in the group for three years. If they’re sold outside the group before three years, the original gain or loss must be added back.
Other Adjustments
The UAE Minister may announce other rules and adjustments as needed. Companies should always keep an eye on new updates.
Why Businesses Must Track Adjustments
- Compliance keeps your business away from penalties.
- You can save money by using all the tax reliefs you qualify for.
- Good record-keeping helps during audits.
- Accurate adjustments protect your future profits.
Top Points for UAE Corporate Tax Adjustments
- Always start with financial statements prepared in line with UAE standards.
- Add or remove gains and losses from assets, as per law.
- Use the right value when you deal with related parties.
- Apply transitional rules if you owned assets before the tax law started.
- Claim exempt income and incentives correctly.
- Keep records for at least seven years.
How Mubarak Al Ketbi (MAK) Auditing Can Help
Mubarak Al Ketbi (MAK) Auditing helps your business with every adjustment for UAE corporate tax. Our expert team gives advice that matches your needs, keeps you up-to-date, and helps you avoid problems with the authorities. We make sure you always stay on the right side of the law. As the saying goes, “Let’s cross that bridge when we come to it”—but with our help, you won’t need to worry about any bumps in the road!
- For more information, visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates - Or contact/WhatsApp us at +971 50 276 2132
