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The U.A.E. Ministry of Finance releases updated guidance on the Corporate Tax (CT) regime

The UAE Ministry of Finance has released an updated set of “frequently asked questions” to provide guidance on the UAE CT regime. Some key updates are presented below:

  • If a taxable person is carrying a provision in their books of accounts prior to the effective CT date and such provision is released after the effective CT date, then such credit to the profit or loss statement will be subject to CT.
  • Doubtful debts are allowed as deductible expenditure, in alignment with the International Financial Reporting Standards (IFRS).
  • Employee entertainment costs will generally be deductible for CT purposes provided they are incurred for business purposes.
  • Where a company pays a management fee to its parent or to any other related party, transfer pricing rules will need to be considered to ensure that such fee meets the arm’s length standard. Any amount paid that is above the arm’s length standard will not be deductible for CT purposes.
  • Where remuneration is paid to a director or owner of the business or to someone who is related to the director or the owner of the business, and considered a connected person, such remuneration should reflect the market standard for the relevant role and the services performed. Any amount paid that is above the market standard will not be deductible for CT purposes.
  • Where several business activities are conducted by one natural person, the aggregate of all business activities will be considered when determining whether it exceeds the AED 1 million annual turnover threshold. Natural persons will be subject to the UAE CT if they derive an annual turnover exceeding AED 1 million from a business activity(ies) in the UAE.

The TLA Tax team, headed by Partner Irfan Munwar, remains available for any queries or assistance in the implementation of the UAE CT.

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