Page 5 - ICAI UAE TAX UPDATE_AUGUST 2024

3 UAE TAX UPDATES
3.1 UAE Corporate Tax – Determining Taxable Income

UAE Corporate Tax Newsletter
Once the Taxable Income for the relevant Tax Period has
The Federal Tax Authority (FTA) has issued guide on been determined, it is subject to Corporate Tax at the
determination of taxable Income as per the Federal following rates:
Decree Law No. 47 of 2022 concerning the Taxation of
Corporations and Businesses. • 0% on the portion of the Taxable Income not exceeding
AED 375,000.
This guide particularly focuses on the below aspects:
• 9% on the portion of the Taxable Income exceeding
A. Key Concepts for Taxable Income and Corporate Tax AED 375,000.
Calculation
A Qualifying Free Zone Person is subject to Corporate
B. Adjustments to Accounting Income such as unrealised Tax at the following rates:
gains/losses, exempt income, deductible & non-
deductible expenses, • 0% on the Qualifying Income.
• 9% on the Taxable Income that is not Qualifying Income.
C. Other Adjustments such as Interest deduction, Tax
losses, Tax Credits and Taxation for Non-Residents Tax Period

This guide covers the above key concepts along with The Tax Period for a Taxable Person (other than a natural
case studies to further illustrate them. person) is their Financial Year, or part thereof, for which
a Tax Return is required to be filed.
A. Key Concepts for Taxable Income and Corporate Tax
Calculation This usually means the 12-month period for which they
prepare their Financial Statements. The Tax Period of a
The starting point for determining Taxable Income Taxable Person that is a natural person is always the
is the Accounting Income. This is the accounting net Gregorian calendar year, i.e. 1 January to 31 December.
profit or loss for a relevant Tax Period, based on the
Financial Statements prepared in accordance with IFRS, B. Adjustments to Accounting Income
or IFRS for small and medium-sized entities (IFRS for
SMEs) or as per the income and expenditure statement 1. Unrealised Gains and Losses:
maintained by Taxable Persons that follow the Cash Businesses that prepare Financial Statements using
Basis of Accounting. the Accrual Basis of Accounting may elect to take into
account gains and losses in case of assets and liabilities
Taxable Persons that earn Revenue that does not exceed on a realisation basis.
AED 3 million in a Tax Period may use the Cash Basis of
Accounting. If the Taxable Person does not make the election to apply
the realisation basis in their first Tax Period, then this will
Once a Taxable Person’s Revenue exceeds AED 3 million be considered an irrevocable election in itself.
in a Tax Period, they must prepare Financial Statements
using the Accrual Basis of Accounting, except under Any realised or unrealised gains and losses that are
exceptional circumstances and following the FTA’s reported in the Financial Statements, insofar as they
approval. would not be subsequently recognised in the statement
of income, must also be taken into account in the
Calculation of Tax Payable determination of Taxable Income
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UAE TAX UPDATE NEWSLETTER ISSUE 05 - August 2024 ISSUE 05 - August 2024 UAE TAX UPDATE NEWSLETTER