The Finance World Magazine| Edition: March 2023

Corporate Tax
How UAE Corporate Tax Law Treats
Unrealised Gains and Losses
Adjusting for unrealized gains and losses is a crucial step in accounting for profits.
Under the UAE CT law, Article 20(3), individuals subject to taxation can opt to account
for gains and losses based on when they are realized for assets and liabilities that are
subject to fair value or impairment accounting under applicable accounting standards,
or for all assets and liabilities held on capital account at the end of a tax period.
The UAE Corporate Tax law
mandates that taxpayers must
use an indirect approach
to calculate their taxable
profits. This involves creating financial
statements based on the applicable
accounting standards, and then
adjusting the accounting profits to
determine the taxable profits. The
adjustments usually require adding back
non-deductible expenses, subtracting
expenses not recognized in accounting
profits, excluding income not subject
to UAE CT law, and including taxable
income that is not part of accounting
profits.
One of the most critical adjustments to
accounting profits is the adjustment of
unrealised gains and losses. According
to Article 20(3) of the UAE CT law,
taxable persons can choose to account
for gains and losses on a realisation
basis for all assets and liabilities subject
to fair value or impairment accounting
under applicable accounting standards,
or all assets and liabilities held on
capital account at the end of a tax
period. However, the gain or loss on
all assets and liabilities held in the
revenue account will be considered
on an unrealised basis, as provided for
in clause 20(3)(b) of the UAE CT law.
Taxable persons may opt to be taxed on
84 www.thefinanceworld.com March 2023