Synopsis Of

Corporate Tax Law

United Arab Emirates

Overview
The UAE Ministry of Finance published the Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses on
9 December 2022 (CT Law). The CIT Law shall come into effect 15 days after its publication in the official gazette. The CIT
Law will apply to taxable persons whose tax periods commencing on or after 1 June 2023

Prepared By:
Mahar Afzal and Faiza Hashmi
Kress Cooper – Tax I Audit I Advisory I Accounting
office: +971 4 3391 488
Mobile: +971 55 699 6425
Email: faiza.hashmi@kresscooper.com
Web:www.kresscooper.com

December 20, 2022

 TABLE OF CONTENTS
A. Summary of the Law .......................................................................................................................... 1
Chapter One – General Provisions ........................................................................................................................1
Article 1 – Key Definitions ..........................................................................................................................1
Chapter Two – Imposition of Corporate Tax and Applicable Rates .....................................................................1
Article 2 – Imposition of Corporate Tax ......................................................................................................1
Article 3 – Corporate Tax Rate.....................................................................................................................1
Chapter Three – Imposition of Corporate Tax and Applicable Rates ...................................................................1
Article 4 – Exempt Person ............................................................................................................................1
Article 5 – Government Entity .....................................................................................................................1
Article 6 – Government Controlled Entity ...................................................................................................2
Article 7 – Extractive Business ....................................................................................................................2
Article 8 – Non-Extractive Natural Resource Business ................................................................................2
Article 9 – Qualifying Public Benefit Entity ................................................................................................2
Article 10 – Qualifying Investment Fund .....................................................................................................2
Chapter Four – Taxable Person and Corporate Tax Base .....................................................................................2
Article 11 – Taxable Person .........................................................................................................................2
Article 12 – Corporate Tax Base ..................................................................................................................2
Article 13 – State Sourced Income ...............................................................................................................2
Article 14 – Permanent Establishment .........................................................................................................3
Article 15 – Investment Manager Exemption ...............................................................................................3
Article 16 – Partners in an Unincorporated Partnership ...............................................................................3
Article 17 – Family Foundation (FF) ...........................................................................................................3
Chapter Five – Free Zone Persons ........................................................................................................................3
Article 18 – Qualifying Free Zone Person ....................................................................................................3
Article 19 – Election to be Subject to Corporate Tax ...................................................................................3
Chapter Six – Calculating Taxable Income...........................................................................................................3
Article 20 – General Rules for Determining Taxable Income ......................................................................3
Article 21 – Small Business Relief ...............................................................................................................4
Chapter Seven – Exempt Income ..........................................................................................................................4
Article 22 – Exempt Income.........................................................................................................................4
Article 23 – Participation Exemption ...........................................................................................................4
Article 24 – Foreign Permanent Establishment Exemption ..........................................................................4
Article 25 – Non-Resident Person Operating Aircraft or Ships in International Transportation ..................4
Chapter Eight – Reliefs .........................................................................................................................................4
Article 26 – Transfers within a Qualifying Group ........................................................................................4
Article 27 – Business Restructuring Relief ..................................................................................................4
Chapter Nine – Deductions ...................................................................................................................................5
Article 28 – Deductible Expenditure ............................................................................................................5
Article 29– Interest Expenditure...................................................................................................................5
Article 30– General Interest Deduction Limitation Rule..............................................................................5
Article 31– Specific Interest Deduction Limitation Rule .............................................................................5
Article 32 – Entertainment Expenditure .......................................................................................................5
Article 33 – Non-deductible Expenditure .....................................................................................................5
Chapter Ten – Transactions with Related Parties and Connected Persons ...........................................................5
Article 34 – Arm’s Length Principle ............................................................................................................5
Article 35 – Related Parties and Control ......................................................................................................5
Article 36 – Payments to Connected Persons ...............................................................................................6
Chapter Eleven – Tax Loss Provisions .................................................................................................................6
 Article 37 – Tax Loss Relief.........................................................................................................................6
Article 38 – Transfer of Tax Loss ................................................................................................................6
Article 39 – Limitation on Tax Losses Carried Forward ..............................................................................6
Chapter Twelve – Tax Group Provisions ..............................................................................................................6
Article 40 – Tax Group.................................................................................................................................6
Article 41 – Date of Formation and Cessation of a Tax Group ....................................................................6
Article 42 – Taxable Income of a Tax Group: ..............................................................................................6
Chapter Thirteen – Calculation of Corporate Tax Payable ...................................................................................7
Article 43 – Currency ...................................................................................................................................7
Article 44 – Calculation and Settlement of Corporate Tax...........................................................................7
Article 45 – Withholding Tax.......................................................................................................................7
Article 46 – Withholding Tax (WHT) Credit ...............................................................................................7
Article 47 – Foreign Tax Credit (FTC).........................................................................................................7
Chapter Fourteen – Payment and Refund of Corporate Tax .................................................................................7
Article 48 – Corporate Tax Payment ............................................................................................................7
Article 49 – Corporate Tax Refund ..............................................................................................................7
Chapter Fifteen – Anti-Abuse Rules .....................................................................................................................7
Article 50 – General Anti-abuse Rule ..........................................................................................................7
Chapter Sixteen – Tax Registration and Deregistration ........................................................................................7
Article 51 – Tax Registration .......................................................................................................................7
Article 52 – Tax Deregistration ....................................................................................................................7
Chapter Seventeen – Tax Returns and Clarifications ............................................................................................8
Article 53 – Tax Returns ..............................................................................................................................8
Article 54 – Financial Statements .................................................................................................................8
Article 55 – Transfer Pricing Documentation ..............................................................................................8
Article 56 – Record Keeping ........................................................................................................................8
Article 57 – Tax Period ................................................................................................................................8
Article 58 – Change of Tax Period ...............................................................................................................8
Article 59 – Clarifications ............................................................................................................................8
Chapter Eighteen – Violations and Penalties ........................................................................................................8
Article 60 – Assessment of Corporate Tax and Penalties .............................................................................8
Chapter Nineteen – Transitional Rules .................................................................................................................8
Article 61 – Transitional Rules .....................................................................................................................8
Chapter Twenty – Closing provisions ...................................................................................................................8
Article 62 – Delegation of Power .................................................................................................................8
Article 63 – Administrative Policies and Procedures ...................................................................................8
Article 64 – Cooperating with the Authority ................................................................................................8
Article 65 – Revenue Sharing.......................................................................................................................8
Article 66 – International Agreements .........................................................................................................8
Article 67 – Implementing Decisions ...........................................................................................................8
Article 68 – Cancellation of Conflicting Provisions .....................................................................................8
Article 69 – Application of this Decree-Law to Tax Periods .......................................................................8
Article 70 – Publication and Application of this Decree-Law ......................................................................8
B. How Can Kress Cooper Help............................................................................................................. 9
C. Corporate Tax Team ........................................................................................................................ 10
A. Summary of the Law
His Highness Sheikh Mohamed bin Zayed Al Nahyan,
President of the United Arab Emirates, has issued the
Federal Decree-Law No. 47 of 2022 (the CT Law) on 3
October 2022.
Chapter One – General Provisions
Article 1 – Key Definitions
Qualifying Income: Any income derived by a
Qualifying Free Zone Person that is subject to Corporate
Tax (CT) at 0%.
Person: Any natural person or juridical person.
Free Zone: A designated and defined geographic area
within the State that is specified in a decision issued
by the Cabinet at the suggestion of the Minister.
Free Zone Person: A juridical person incorporated,
established or otherwise registered in a Free Zone,
including a branch of a Non-Resident Person registered
in a Free Zone.
Unincorporated Partnership: A relationship established
by contract between two persons or more, such as a
partnership or trust or any other similar association of
persons, in accordance with the applicable legislation
of the State.
Investment Manager: A Person who provides
brokerage or investment management services that is
subject to the regulatory oversight of the competent
authority in the State.
Foreign Partnership: A relationship established by
contract between two persons or more, such as a
partnership or trust or any other similar association of
persons, in accordance with laws of a foreign
jurisdiction.
Foreign Tax Credit: Tax paid under the laws of a
foreign jurisdiction on income or profits that may be
deducted from the CT due, in accordance with the
conditions of Clause 2 of Article 47 of this Decree-Law.
Accounting Income: The accounting net profit or loss
for the relevant Tax Period as per the financial
statements prepared in accordance with the provisions
of Article 20 of this Decree-Law.
Foreign Permanent Establishment: A place of Business
or other form of presence outside the State of a Resident
Person that is determined in accordance with the criteria
prescribed in Article 14 of this Decree-Law.
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Withholding Tax: CT to be withheld from State
Sourced Income.
Authority: Federal Tax Authority
Minister: Minister of Finance
Non-Extractive Natural Resource Business: The
Business or Business Activity of separating, treating,
refining, processing, storing, transporting, marketing or
distributing the Natural Resources of the State
Chapter Two – Imposition of Corporate Tax and
Applicable Rates
Article 2 – Imposition of Corporate Tax
CT shall be imposed on taxable income.
Article 3 – Corporate Tax Rate
The taxable person shall pay 0% CT on taxable income
not exceeding the threshold and 9% on taxable income
exceeding the threshold. The threshold shall be specified
in the Cabinet Decision, and we assumed it will be Dh
375,000 as provided in the Ministry's initial
announcement related to the CT.
The qualifying free zone person shall pay 0% CT on the
qualifying free zone income and 9% on the non-
qualifying taxable income. The definition of the
qualifying income will be provided in the Cabinet
Decision.
Chapter Three – Imposition of Corporate Tax and
Applicable Rates
Article 4 – Exempt Person
These persons: (i) Government entity, (ii) Government
controlled entity, (iii) Person engaged in an Extractive
Business, (iv) Person engaged in a Non-Extractive
Natural Resource Business, (v) Qualifying Public
Benefit Entity, (vi) Qualifying Investment Fund, (vii)
public and private pension or social security fund, and
(viii) UAE incorporated person wholly owned and
controlled by (i), (ii), (vi) and (vii) of this article are
exempt from CT subject to fulfilling the conditions.
Article 5 – Government Entity
The Govt entity shall be exempt from CT, unless it
conducts a business or business activity under a licence
issued by a licensing Authority.
[1]

Article 6 – Government Controlled Entity
The Govt controlled entity shall be exempt from CT,
unless it conducts a business or business activity that is
not its mandated activity.
Article 7 – Extractive Business
The provisions of the CT law shall not apply to the
extractive business where the person (i) directly or
indirectly holds or has an interest in a right, concession
or license issued by a local government to undertake its
extractive business, and the person (ii) is subject to
Emirate level tax. To avail of this exemption, the person
will have to notify the Ministry.
Article 8 – Non-Extractive Natural Resource
Business
The provisions of the CT law shall not apply to the non-
extractive business where the person (i) directly or
indirectly holds or has an interest in a right, concession
or licence issued by a local government to undertake the
non-extractive business, (ii) derives income from this
business solely from persons that undertake a business
or business activity, and (iii) subject to tax at the
Emirates level. To avail this exemption, a person must
notify the Ministry.
Article 9 – Qualifying Public Benefit Entity
A qualifying public benefit entity shall be exempt from
CT, if all the following conditions are fulfilled:
i. It is established and operated exclusively for
religious, charitable, scientific, artistic,
cultural, athletic, educational, healthcare,
environmental, humanitarian, animal
protection or other similar purposes. As a
professional entity, like a chamber of
commerce or a similar entity operated
exclusively for the promotion of social welfare
or public benefit.
ii. It does not conduct a business or business
activity except required for the main purpose.
iii. Its income or assets are used exclusively in the
furtherance of its main purpose.
iv. Its income or assets are not payable to, or
otherwise available to, for the personal benefit
of any shareholder member, trustee, founder or
settlor except Qualifying Public Benefit Entity,
Government Entity or Government Controlled
Entity.
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Article 10 – Qualifying Investment Fund
An investment fund may apply to the FTA to be exempt
from CT as a qualifying investment fund where all of the
following conditions are met:
i. The investment fund or the investment fund’s
manager is subject to the regulatory oversight
of a competent authority.
ii. Interests in the investment fund are traded on a
recognized stock exchange or are marketed and
made available sufficiently widely to investors.
iii. The principal purpose of the investment fund is
not to avoid CT.
Chapter Four – Taxable Person and Corporate Tax
Base
Article 11 – Taxable Person
The resident taxable persons include any of (i) the
juridical person incorporated in the UAE, including free
zones businesses, (ii) the juridical person established out
of the UAE but controlled and managed from the UAE,
(iii) any natural person who conducts a business or
business activity in the UAE or (iv) any other person
determined in a decision issued by the Cabinet. While
the non-resident taxable persons comprise any of (i) the
permanent establishment (PE) of the non-resident
person in the UAE, (ii) UAE-sourced income of the non-
resident person, or (iii) nexus in the UAE of the non-
resident person to drive UAE-sourced income. Sole
establishment and civil companies are considered
natural persons, and LLCs, PSCs, PJSCs etc. are
juridical persons in the UAE.
Article 12 – Corporate Tax Base
The juridical resident taxable person and juridical non-
resident taxable person, which are being controlled and
managed from UAE, shall be subject to CT on their
worldwide taxable income, while a natural resident
taxable person shall pay CT on the taxable income of the
UAE business (including income earned out of UAE).
The non-resident taxable person shall be liable to pay
tax on the taxable income attributable to the PE in the
UAE, UAE-sourced taxable income not attributable to
the PE and taxable income that is attributable to the
nexus of the non-resident person in the UAE.
Article 13 – State Sourced Income
State-sourced income includes that income derived from
(i) the UAE resident person or (ii) the PE of the non-
resident person in the UAE or (iii) activities performed,
assets located, capital invested, rights used, services
[2]
performed or benefitted in the UAE. For example,
income from the sale of goods or provision of services
in UAE, income from contracts performed in the UAE,
income from the use or right to use intellectual property
in the UAE etc.
Article 14 – Permanent Establishment
Where the non-resident person (i) has a fixed or
permanent place in the UAE through which the business
of the non-resident person is conducted; or (ii) has a
person in the UAE that habitually exercises an authority
to conduct a business or business activity in the UAE on
behalf of the non-resident person or (iii) has any other
form of nexus in the UAE, then it will be assumed that
non-resident person has PE in the UAE.
The fixed establishment includes a place of
management, branch, office, factory, workshop, real
property and building sites where activities would be
carried out for more than six months. Installations and
structures used in exploring natural resources, mines, oil
or gas wells, quarries and other places to extract natural
resources will also be considered PEs. A Person shall be
considered as a habitually exercising authority if the
person habitually concludes or negotiate contracts on
behalf of the non-resident person.
If the person performs support services like preparatory
or auxiliary services to a non-resident person, or there is
a fixed place where the goods of the non-resident person
are displayed and delivered, shall not be considered the
PE. If a person conducts a business or business activity
in the UAE as an independent agent and acts for the non-
resident person in the ordinary course of that business or
business activity, then it will not be assumed that the
person habitually exercises authority to conduct a
business or business activity in the UAE on behalf of the
non-resident person.
Article 15 – Investment Manager Exemption
The investment manager shall be considered an
independent agent when acting on behalf of a non-
resident person if the investment manager is: (i)
providing investment management or brokerage
services, (ii) subject to regulatory oversight, (iii)
carrying out transactions in the ordinary course of
business, (iv) acting in an independent capacity, (v)
transacting on arm’ length basis and receiving
compensation for services, and (vi) not representing
non-resident person related to any other income in the
UAE which is subject to CT.
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Article 16 – Partners in an Unincorporated
Partnership
An unincorporated partnership shall not be considered a
taxable person in its own right, and partners of an
unincorporated partnership shall be treated as individual
taxable persons unless an application is made to the FTA
for the Unincorporated Partnership to be treated as a
taxable person. An incorporated partnership where the
liability of any partner is not unlimited shall be treated
like a juridical person.
Article 17 – Family Foundation (FF)
Generally, the FF is a juridical person with a separate
legal personality, and prima facie is subject to CT.
However, the FF can apply to the FTA to be treated as
an unincorporated partnership if (i) FF is established for
benefit, (ii) the principal activity is investing/disbursing
or managing assets or funds with the saving or
investment, (iii) FF does not conduct the business or
business activity, and (iv) FF main purpose is not to
avoid the tax. The FF shall be treated as an
unincorporated partnership if approved by the FTA.
Chapter Five – Free Zone Persons
Article 18 – Qualifying Free Zone Person
The persons shall be considered a qualifying free zone
person if they (i) maintain adequate substance in the
UAE, (ii) derive qualifying income, (iii) comply with
transfer pricing rules, and (iv) not elected to be subject
to CT. All free zone taxable persons shall be required to
register and file a CT return, regardless of whether they
are qualifying free zone persons.
Article 19 – Election to be Subject to Corporate Tax
The Qualifying Free Zone Person can elect to be subject
to CT.
Chapter Six – Calculating Taxable Income
Article 20 – General Rules for Determining Taxable
Income
The taxable income of each taxable person shall be
determined separately based on financial statements
prepared as per applicable accounting standards. To
arrive at the taxable income, adjustments shall be made
in the accounting income for the unrealized gain or loss,
exempt income, reliefs, deductions, related party
transactions, tax loss relief, incentives or special reliefs,
income or expenditure that have not otherwise been
considered.
[3]
Article 21 – Small Business Relief
If the taxable income of the resident taxable person does
not exceed a threshold (to be set by the minister) in the
current period and previous tax periods, and all other
conditions (to be set by the minister) are met, then the
taxable person may be elected to be treated as not
derived any taxable income. If the resident taxable
person has opted for this option, then privileges for the
specific reliefs, deductions, and exempt income shall not
be available. Moreover, the person will not be required
to comply transfer pricing documentation requirement.
Chapter Seven – Exempt Income
Article 22 – Exempt Income
The following income and related expenditures shall be
exempt while calculating taxable income:
i. Dividends and other profit distributions
received from the juridical resident person.
ii. Dividends and other profit distributions
received from a participating Interest in a
foreign juridical person. where:
a. the person is at least holding a 5%
interest in the shares or equity for an
uninterrupted period of 12 months,
b. participation is subject to a tax of at least
9% in a foreign jurisdiction.
c. this participation entitles the taxable
person to receive at least 5% profit and
proceeds upon liquidation.
d. At least 50% of the assets of the
participation would have qualified for
CT exemption if held by the taxable
person.
iii. Any other income from a qualifying
participating Interest.
iv. Income of a foreign PE where the person has
opted not to take his income and associated
expenses.
v. Income derived by foreign operators from
operating aircraft or ships in international
transportation, where the same privilege is
available to the UAE’s operators in that
country.
Article 23 – Participation Exemption
Income from a participating interest shall be exempt
from CT if the conditions given in 23(ii) are fulfilled.
Out of the given conditions, the main conditions are that
the taxable person holds at least 5% shares of the foreign
entity for an uninterrupted period of 12 months and
participation income is at least subject to 9% tax.
Moreover, the person is entitled to at least 5% of taxable
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profits and assets of the company in which the person
has participated. Exemption does not apply to a loss
realised on the liquidation of a Participation.
Article 24 – Foreign Permanent Establishment
Exemption
A resident person can make an election to not take into
account, the income, and associated expenditure, of its
foreign permanent establishments in determining its
taxable Income, and the taxable person can claim this
exemption if the tax on foreign income is at least 9%.
Article 25 – Non-Resident Person Operating Aircraft
or Ships in International Transportation
Income derived by a non-resident person shall not be
subject to tax if (A) that income is derived from the
operation of aircraft or ships in international
transportation, where the non-resident person is in the
business of (i) International transport of passengers,
livestock, mail, parcels, merchandise or goods by air or
by sea, or (ii) leasing or chartering aircraft or ships used
in international transportation or (iii) leasing of
equipment which is integral to the seaworthiness of
ships or the airworthiness of aircraft used in
international transportation, and (B) the same exemption
is available to UAE operators of aircrafts and ships also
in their country.
Chapter Eight – Reliefs
Article 26 – Transfers within a Qualifying Group
No gain or loss shall arise on transferring assets or
liabilities between two taxable members of the same
qualifying groups if the assets or liabilities are not
transferred out of the qualifying group within 2 years
from the date of transfer or taxable person does not cease
to be members of the same qualifying group. Two
taxable persons shall be treated as members of the same
qualifying group where (i) Taxable persons are juridical
resident person, or PE of non-resident person, (ii) either
taxable person has 75% ownership in other taxable
person or third person has at least 75% ownership in two
taxable persons, (iii) none of them is exempt or qualified
free zone persons, (iv) same financial years, and (v)
apply same standards to prepare financials statements.
The transfer will be recorded at book value.
Article 27 – Business Restructuring Relief
Upon fulfilment of the conditions, no gain or loss shall
be taken into account if a taxable person transfers its
entire business or an independent part of its business to
[4]
another taxable person or to the person who will become
a taxable person as a result of the transfer in exchange
for shares or other ownership interests of the transferee.
Where the entire business is being transferred, and even
the transferor ceases to exist as a result of transfer, still,
no gain or loss shall be booked related to this transfer.
The assets and liabilities transferred shall be treated as
being transferred at their net book value.
Chapter Nine – Deductions
Article 28 – Deductible Expenditure
Revenue nature expenditure incurred wholly and
exclusively for the taxable person’s business shall be
deductible in the tax period in which it is incurred,
subject to the provisions of the Law. Non-business
expenses, non-business loss, and expenses related to the
exempt income shall not be allowed. If the expenditures
have been incurred for more than one purpose, then
identifiable part and proportionate expenditures shall be
allowed.
Article 29– Interest Expenditure
Net interest (interest expense less interest income) shall
be allowed in the period it incurred, subject to the
fulfilment of conditions as given in articles 28, 30 and
31 of the law.
Article 30– General Interest Deduction Limitation
Rule
Net interest expense shall be deductible 100% if below
the limit specified by the Minister. If its above the limit,
up to 30% of EBIDTA (earnings before the deduction of
interest, tax, depreciation and amortisation) shall be
allowed in the tax period in which it is incurred, and the
remaining interest can be carried forward for 10 tax
periods. Exempt income shall not be considered while
calculating EBIDTA. The interest capping rules shall
not apply to the bank, insurance provider, taxable
natural person and any other person specified by the
Minister.
Article 31– Specific Interest Deduction Limitation
Rule
Interest on loan taken from a related party for payment
to the related party for (i) dividend or profit distribution,
or (ii) redemption, repurchase, reduction or return of
share capital, or (iii) capital contribution or (iv)
acquisition of an ownership interest (even the party
became a related party after acquisition), shall not be
allowed unless the taxable person can demonstrate that
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loan has been taken not to gain a CT advantage. If the
related party is subject to at least 9% CT, then it will be
assumed that tax advantage has not been taken.
Article 32 – Entertainment Expenditure
Entertainment expenses for meals, accommodation,
transportation, admission fees, facilities and equipment
used in connection with such entertainment, amusement
or recreation, and such other entertainment expenses as
specified by the Minister if incurred during the tax
period to receive and entertain the taxable person’s
customers, shareholders, suppliers or other business
partners, shall be allowed up to 50% only.
Article 33 – Non-deductible Expenditure
No deduction is allowed for (i) donations, grants, gifts
(unless given to qualifying public benefit entity), (ii)
fines and penalties unless awarded as compensation, (iii)
bribes or other illicit payments, (iv) dividends, profit
distributions or benefits of a similar nature paid to an
owner, (v) amount withdrawn by natural person
business owner or partner in an unincorporated
partnership, (vi) corporate tax imposed, (vii)
recoverable input tax (non-recoverable input tax is
allowed), (viii) tax imposed out of UAE, and (ix) such
other expenses as specified by the Minister.
Chapter Ten – Transactions with Related Parties
and Connected Persons
Article 34 – Arm’s Length Principle
While calculating taxable income, transactions with the
related parties and connected persons should be reported
at arm’s length price. The law recommends applying
transfer pricing methods given in the OECD guidelines
which are [(i) Comparable price method, (ii) Cost plus
method, (iii) Resale price method, (iv) Transactional net
margin method and (v) transactional profit split
method]. The taxable person can use other appropriate
and justified methods or a combination of various
methods to determine the arm’s length price. If the
transactions are not at arm’s length, adjustments and
corresponding adjustments shall be made by the FTA, or
foreign competent authority, as the case may be.
Article 35 – Related Parties and Control
Generally, related parties of an individual, refer to the
individual’s relatives as well as companies in which the
individual, alone or together with their related parties,
has a controlling ownership interest (typically 50% or
more of shares of the company). Similarly, related
parties of a company, refer to any other companies in
[5]
which the company, alone or together with their related
parties, has a controlling ownership interest (typically
50% or more of shares of the company), or that are under
greater than 50% common ownership.
Connected persons are different from related parties. A
person will be considered “connected” to a business that
is within the scope of UAE CT if they are (i) the owner
of the business; (ii) a director or officer of the business;
or (iii) related party of either of the above.
Article 36 – Payments to Connected Persons
Any payment made or benefit provided to the taxable
person’s owner, director or officer; or related party of
such owner, director, or officer shall be allowed for tax
purposes if these payments or benefits are as per market
value based on transfer pricing principles. This article
shall not apply to the taxable person (i) whose shares are
traded on the Recognized Stock Exchange, or (ii) who is
subject to regulatory oversight, or (iii) whom the
Minister specifies.
Chapter Eleven – Tax Loss Provisions
Article 37 – Tax Loss Relief
Taxable persons can carry forward their tax losses for an
unlimited period and adjust it against the future taxable
income, but the amount of tax loss that can be adjusted
against the taxable income for any subsequent tax period
should not exceed 75% or other % as specified by the
Minister, of the taxable income for that tax period before
any tax loss relief. The taxable person cannot claim tax
loss relief if the losses are incurred before the
commencement of CT and/or before a person becomes
a taxable person. Moreover, the taxable person cannot
claim tax loss relief related to the asset or activity, the
income of which is exempt from CT.
Article 38 – Transfer of Tax Loss
Tax loss of one taxable person can be adjusted against
the taxable income of another upon fulfilment of these
conditions (i) Both taxable persons are juridical resident
persons, (ii) either taxable person has 75% ownership in
another taxable person or third person has at least 75%
ownership in both taxable persons, (iii) common
ownership exist before the start of the tax period in
which loss is incurred, and remains till the loss is offset
(iv) none of them is exempt or qualified free zone
persons, (v) same financial years, and (v) apply same
standards to prepare financials statements.
Article 39 – Limitation on Tax Losses Carried
Forward
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Tax Losses can only be carried forward and utilized if
there is a (i) continuity of ownership (same person(s)
continuously owned at least a 50% shares from the
beginning of the tax period in which the tax loss is
incurred to the end of the tax period in which the tax loss
or part thereof is offset); or (ii) continuity of business if
there is a change in ownership by more than 50%, then
taxable person continued to conduct the same or a
similar business or business activity. Continuity of
ownership and continuity of business does not apply to
the taxable person listed on the Registered Stock
Exchange.
Chapter Twelve – Tax Group Provisions
Article 40 – Tax Group
A group of UAE resident companies can form a tax
group. The parent company can file an application to the
FTA, where all these conditions are fulfilled (i) all
potential group members are juridical resident persons,
(ii) the parent company has at least 95% direct and
indirect ownership, voting rights and entitlement in
assets/profits in subsidiaries, (iii) none of them is
exempt or qualified free zone persons, (iv) same
financial years, and (v) apply same standards to prepare
financials statements. Govt entities are exempt from CT,
but the govt entity holding at least 95% shares of
subsidiaries can become a part of the tax group and can
apply for the tax group.
Article 41 – Date of Formation and Cessation of a
Tax Group
The beginning of the tax period as specified in the
application submitted to the FTA, or the beginning of
any other tax period as determined by the FTA, shall be
considered the effective date of formation of the tax
group. If there is any amendment in the tax group (if a
member leaves and/or a new member joins), it will be
effective from the commencement of the tax period in
which the amendment took place. As a special case, if
any subsidiary does not meet the conditions to be part of
the tax group, it will be effective from the beginning of
the tax period in which the subsidiary doesn’t meet
conditions.
Article 42 – Taxable Income of a Tax Group:
i. The parent company shall consolidate the
financial results of the tax group after
eliminating intra tax group transactions.
ii. Pre-grouping tax losses of the subsidiary
joining an existing tax group shall become
carry-forward losses of the tax group, and can
be used to offset the taxable income of the tax
group insofar this income is attributable to the
[6]
 relevant Subsidiary. Similarly, unutilised tax
losses of the existing tax group cannot be used
to offset the taxable income of the tax group
insofar this income is attributable to the new
subsidiary.
iii. If the subsidiary leaves the tax group, then the
unutilised pre-grouping tax losses of the
subsidiary shall not remain with the tax
group.
iv. On cessation of the tax group, unutilised tax
losses of the tax group shall be allocated to
the parent company, and if the parent
company ceases to be taxable person, then tax
losses of the tax group shall not be available
for offset against future taxable Income of
individual subsidiaries, except for any
unutilized pre-grouping tax losses of such
subsidiaries.
Chapter Thirteen – Calculation of Corporate Tax
Payable
Article 43 – Currency
All amounts should be quantified in the UAE dirham,
and if the amounts are not in the UAE dirham, then it
must be converted at the applicable exchange rate set
by the central bank of the UAE.
Article 44 – Calculation and Settlement of Corporate
Tax
Out of the gross tax payable, the taxable person first
shall adjust the withholding tax, then available
foreign tax credit and then credits or other forms of
relief specified by the Minister to arrive at the net tax
payable.
Article 45 – Withholding Tax
The state-sourced income of the non-resident taxable
person unless the income is attributable to the PE in
UAE, or any other income specified by the Minister,
shall be subject to 0% withholding tax unless any other
rate decided by the Minister.
Article 46 – Withholding Tax (WHT) Credit
Withholding tax (which is zero per cent for the time
being) shall be deducted from the gross amount of the
payment and remitted to the FTA. The maximum
amount of WHT credit is up to the CT payables, and
Kress Cooper Management Consultant
2408 Al Manara Tower, Business Bay, Dubai, UAE
Ph+971 4 3391 488 I email: info@kresscooper.com I www.kresscooper.com
excess WHT shall be refunded to the taxable person
upon submission of refund application.
Article 47 – Foreign Tax Credit (FTC)
FTC shall be allowed to taxable persons, but FTC
cannot exceed the UAE CT due on the relevant foreign
income. Any unutilized FTC cannot be carried forward
or carried back.
Chapter Fourteen – Payment and Refund of
Corporate Tax
Article 48 – Corporate Tax Payment
Taxable person must settle the CT payable within 9
months from the end of the relevant tax period or by
such other date as determined by the FTA.
Article 49 – Corporate Tax Refund
Taxable person may apply to the FTA for a CT refund
if the taxable person has unutilized WHT or overpaid
CT.
Chapter Fifteen – Anti-Abuse Rules
Article 50 – General Anti-abuse Rule
The law does not support any arrangement or transaction
to avoid the tax unless there is a valid commercial or
other fiscal reason which reflects economic reality. By
applying the provisions of the anti-abuse rules, the FTA
can decide to adjust the advantage taken.
Chapter Sixteen – Tax Registration and
Deregistration
Article 51 – Tax Registration
Every taxable person shall register for CT and get a tax
registration certificate except in the circumstances
prescribed by the Minister. The FTA may also request
certain exempt persons to register for UAE CT.
Taxpayers are required to register before they file their
first CT return. There is no registration threshold for
UAE CT registration.
Article 52 – Tax Deregistration
A registered CT person shall apply for deregistration to
FTA where there is a cessation of its business or
business activity, whether by dissolution, liquidation, or
otherwise, in the form and manner and within the
timeline specified by the FTA. Before the deregistration
taxable person shall be liable to pay the penalties and
outstanding principal amount.
[7]
Chapter Seventeen – Tax Returns and Clarifications
Article 53 – Tax Returns
Taxable person must file a tax return to the FTA within
9 months from the end of the relevant tax period or by
such other date as directed by the FTA. The parent
company shall file the return on behalf of the tax group.
Article 54 – Financial Statements
The FTA may ask to submit the financial statements.
Audited financial statements are not required, but the
Minister may issue a decision and ask for audited or
certified financial statements.
Article 55 – Transfer Pricing Documentation
If a taxable person has transactions with its related
parties and connected persons, the person must maintain
both a master file and a local file in the form and manner
specified by the FTA. FTA may ask the taxable person
to submit information pertaining to the related party
transactions. If asked by the FTA, the taxable person
shall be liable to submit the information within 30 days
following the date of request by the FTA.
Article 56 – Record Keeping
Taxable person shall keep the record for 7 years
following the end of the tax period to which it pertains.
An exempt person shall maintain all records as well.
Article 57 – Tax Period
The tax period shall be the Gregorian calendar year or
the 12 months period for which the taxable person
prepares financial statements.
Article 58 – Change of Tax Period
A taxable person can make an application to the FTA to
change the start and end date of its tax period, or use a
different tax period, subject to conditions to be set by the
FTA.
Article 59 – Clarifications
A person can make an application to the FTA to seek
clarification
Chapter Eighteen – Violations and Penalties
Article 60 – Assessment of Corporate Tax and
Penalties
Tax procedures and decisions will be issued, which will
be helpful to implement the law and shall determine the
penalties and fines related to this.
Chapter Nineteen – Transitional Rules
Article 61 – Transitional Rules
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2408 Al Manara Tower, Business Bay, Dubai, UAE
Ph+971 4 3391 488 I email: info@kresscooper.com I www.kresscooper.com
The ending balances of the financial year that ends
immediately before the first tax period commencement
shall be considered the opening balances for CT
purposes and opening balances shall be prepared
considering the arm’s length principles.
Chapter Twenty – Closing provisions
Article 62 – Delegation of Power
Related to the CT law, the Minister may delegate his
powers in full or partly to the FTA.
Article 63 – Administrative Policies and Procedures
Related to the CT law, the FTA shall issue the
administrative policies, procedures and general
instructions in coordination with the Ministry.
Article 64 – Cooperating with the Authority
All governmental authorities in the UAE shall fully
cooperate and share information with the FTA to
implement the CT law.
Article 65 – Revenue Sharing
CT revenue and administrative penalties collected under
the CT law shall be shared between the federal
government and the local governments based on the
related federal law.
Article 66 – International Agreements
If international agreements are in force in the UAE, and
there is an inconsistency with the CT law, the provision
of the international agreements shall prevail.
Article 67 – Implementing Decisions
Minister and the FTA shall issue, and the Cabinet may
issue at the suggestion of the Minister, the necessary
decisions to implement the provisions of this CT law.
Article 68 – Cancellation of Conflicting Provisions
Any text or provisions contrary to or inconsistent with
the provisions of this CT law shall be abrogated.
Article 69 – Application of this Decree-Law to Tax
Periods
The law shall apply to tax periods commencing on or
after 1 June 2023
Article 70 – Publication and Application of this
Decree-Law
The law shall be published in the official gazette, and
shall come into effect in 15 days from the date of
publication.
………………..….………..end……….……………………
[8]
B. How Can Kress Impact Assessment:

Cooper Help • Assess the impact of the provisions of the

UAE CT Law on the business

• Analysis of the current position of the

business and proposing the revised
structure/options to minimize the tax impact
and identify working capital gap.

Impact Assessment • Perform System Impact analysis by reviewing

the Group's ERP systems from a CT
perspective.

• Provide CT Impact assessment report

discussing key recommendations and
restructuring options including a high-level
financial model.
Implementation

• Incorporate the proposed revised structure of

the company as identified in Impact
Assessment.

• Update the standard operating procedures

and policies of the business to streamline them
with the CT laws and regulations
Implementation • Get the changes implemented in the ERP.

• Review the key contracts and legal

agreements of the business and propose
additions/revisions to streamline them from a
CT perspective.

Advisory & Compliance

• Provide advisory on applicability of CT laws

and regulations on ongoing basis.

• Assist with the Registration of Corporate Tax

with FTA.

• application and liaising with FTA

• Provide Tax Accounting Services to assist

Advisory and • businesses in the preparation of Financial
Compliance Statements as per IFRS and to streamline the
existing Financial Statements as per CT law
and compliances.

• Assist in the preparation and filing of the

corporate tax return.

• Provide customized training to employees on

CT laws and Regulations impacting the
business and its operations.

Kress Cooper Management Consultant

2408 Al Manara Tower, Business Bay, Dubai, UAE
Ph+971 4 3391 488 I email: info@kresscooper.com I www.kresscooper.com [9]
C. Corporate Tax Team
For any support and/or clarification, please
approach the team

MANAGING PARTNER

MAHAR@KRESSCOOPER.COM
+971 4 339 1488 (O)
+971 50 291 7300 (M)
+44 7384 866 550 (M)

Mahar Afzal
( k )

TAX DIRECTOR

faiza.hashmi@kresscooper.com
+971 4 339 1488 (O)
+971 55 699 6425 (M)

Faiza Hashmi

ASSISTANT MANAGER TAX

ssalim@kresscooper.com
+971 4 339 1488 (O)
+971 55 148 0956 (M)

Saqib Saleem

Kress Cooper Management Consultant

2408 Al Manara Tower, Business Bay, Dubai, UAE
Ph+971 4 3391 488 I email: info@kresscooper.com I www.kresscooper.com [10]
Kress Cooper
Kress Cooper was set up with the vision to become
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Kress Cooper Management Consultant

2408 Al Manara Tower, Business Bay, Dubai, UAE
Ph+971 4 3391 488 I email: info@kresscooper.com I www.kresscooper.com [11]