Adjustments to Taxable income – Explained
Summary on calculation of taxable income
Set out below is an illustrative/indicative summary of how Taxable Income will generally be computed for UAE CT purposes:
Net accounting profit/(loss) before tax
Fair value accounting and capital asset adjustments (subject to election)
- less/add: unrealised gains/losses
- less/add: foreign exchange gains/losses
Exempt income
- less: Dividends and profit distributions received from Resident juridical person
- less/add: Participation exemption
– dividends and profit distributions
– other income
– gains/losses from sale
– foreign exchange gains/losses
– impairment gains/losses
- less/add: foreign PE (subject to election)
- less: international transportation (non-residents only)
Reliefs
- Transfers within a qualifying group
- Business restructuring relief
Deductions
- add: expenditure not actually incurred (including provisions)
- add: expenditure of a capital nature
- add: expenditure not wholly and exclusively incurred for Taxable person’s business
- add: expenses incurred in relation to exempt income
- add: limitation on deduction of net interest expense (30% of EBITDA-rule)
- add: other non-deductible interest
- add: donations, grant, gifts to non-Public Benefit Entities
- add: 50% of entertainment expenses
- add: penalties and fines
- add: bribes and other illicit payments
Transactions with related parties and connected persons
Tax loss relief (limited to 75% of taxable income)
- less: carried forward losses
- less: intragroup transfer of losses
Taxable income
Tax liability
- Taxable income > AED375,000 x 9%
- Less: Withholding tax credit
- Less: Foreign tax credit
- Amount owing/refundable
How can Digits help you?
The introduction of the UAE corporate tax system constitutes a substantial shift for businesses operating within the country. Understanding the adjustments applicable when calculating UAE corporate tax is paramount for compliance and financial planning. As businesses operating in the UAE navigate this new tax environment, they must take into account not only their current financial obligations but also the potential effects of their tax liabilities on their future profitability. The potential experts at Digits can help you get your tax structure simplified and help you to stay complied with the authorities. Digits can serve you with the premium services in the best personalized manner possible so that your needs are met as per your expectations. To discover more about our robust services, approach our team now.
