RMC TAX

CONSULTING

Critical Aspects to be considered for

smooth roll over for the

UAE Corporate tax

for year ending 31 Dec 2023

corporate.tax@rmc-tax.com | +971-4-2765667
 Transitional Provisions
1
(Article 61 of the “UAE CT Law” “law”)
A. Arm’s Length Closing Balance Sheet as on 31 st December 2023:
Conduct KYR (Know Your Related parties) and KYC (Know Your Connected
Persons) to identify related parties and connected persons as per Article 35
and Article 36 of the law.
Ensure that all controlled balances with both related parties and connected
persons as of 31st December 2023, are at Arm’s length (at fair market
value).
Outstanding loans to/from related parties may attract deeming interest
provisions.
Long outstanding related party dues may require recharacterization to
related party loans.

B. Valuation of certain assets for unrealised gains/ losses adjustments:

Valuate immovable properties, intangible assets, financial assets and liabilities
at historical cost in the balance sheet as on 31 st December 2023 to claim
benefits under Ministerial Decision 120 for future cost step.

C. Consideration of accounting policies and implication of deferred tax

asset or liability as the case may be.

Payments to Connected Persons

2
(Article 36 of the law)
Ensure that payments to and transactions with connected persons,
including owners, shareholders, partners, directors, officers, and their
relatives, are at arm’s length from January 1, 2024.
Salaries (or remuneration) and other benefits to above parties from
the month January 2024 need to be at Arm’s length.

2
 Maintenance of certain criteria / thresholds
3
w.e.f. 1st January 2024
A. Adequate substance requirements for Free Zone Persons:
Free Zone persons must maintain adequate substance throughout the year (w.e.f
1 st January 2024) to satisfy one of the important conditions of a “Qualifying
Free Zone Person” as required under Article 18(2) of the law.

B. Maintain a threshold for Tax Groups under the law:

Businesses planning to form a tax group under the law need to maintain the
95% threshold in respect of share capital, ownership interest, voting rights, and
profit entitlements from January 1, 2024.

C. Recharacterization and Transfer of Assets:

Address recharacterization or transfer of personal assets, properties, and
personal investments used in the business. Identify personal expenses to be paid
from the business and account the same appropriately.

Actions to be taken before the first tax

4
period (1st January 2024)

Refinement of Group Structure

Close unwarranted branches, offices and liquidate dormant companies.
Finalize partnership agreements and assess implications of unincorporated
partnership firms, family foundations, sole proprietorships, civil companies,
and non-listed public benefits entities.
Align the chart of accounts and create/close specific account heads in Books
of Accounts.

3
 Documentation will be the key to compliance
5
of the UAE CT law

Maintain adequate documentation for revenue and expenses, revenue

agreements, agreement for sharing of expenses.
Ensure finalization and disclosure of revenue streams and review and
refine related party agreements /contracts. Obtain adequate
documentary evidence for all deductible expenses.
Address provisions for bad and doubtful debts, slow-moving items,
unclaimed balances etc as on 31st December 2023.

Contact Information
+971-4-2765667
corporate.tax@rmc-tax.com
www.rmc-tax.com
Office No. 1502, Al Manara Tower,
Business Bay, Dubai, U.A.E.

The aforementioned summary is an amalgamation of several provisions, and it is crucial

to refer directly to UAE CT Law before undertaking any implementation. It is important
to note that this summary does not constitute advisory guidance, recommendations, or
a definitive approach for addressing the mentioned issues.