Navigating the Shift: UAE Corporate Tax Transitional Provisions

Article 61 of the UAE Corporate Tax Law establishes the framework for transitioning into the new tax regime[2]. A Taxable Person’s opening balance sheet for Corporate Tax purposes is the closing financial-reporting balance sheet on the last day of the Financial Year ending immediately before the first Tax Period, subject to Ministerial conditions or adjustments[2].

The Opening Balance Sheet

The cornerstone of the transitional rules is the opening balance sheet for corporate tax purposes. Under Article 61(1), it is the closing balance sheet prepared for financial reporting purposes under accounting standards applied in the State on the last day of the Financial Year that ends immediately before the first Tax Period commences, subject to any conditions or adjustments prescribed by the Minister[2]. The KCM guide states this must be prepared in accordance with IFRS or IFRS for SMEs and must apply the arm’s length principle under Article 34[1].

Anti-Abuse Rules (GAAR)

Article 61(3) provides that Article 50 (GAAR) applies to transactions or arrangements entered into on or after the date the Decree-Law is published in the Official Gazette[2]. The KCM guide cites 10 October 2022 as that publication date[1]. Confirm the controlling Official Gazette date against primary records before treating a specific calendar date as definitive.

Ministerial Decision No. 120 of 2023: Elective Adjustments

Ministerial Decision No. 120 of 2023 provides elective adjustments for pre-CT gains on immovable property, intangible assets, and financial assets and liabilities, made when submitting the first Tax Return[1]. The purpose is to exclude the portion of gain attributable to the pre-Corporate Tax ownership period.

Qualifying Immovable Property

A Taxable Person may elect to adjust Taxable Income for gains on Immovable Property meeting the conditions in Ministerial Decision No. 120[3]. The KCM guide describes two methods: the Valuation Method (excluding gain up to market value at the start of the first Tax Period, determined by a competent government authority) or the Time Apportionment Method (excluding the portion of gain attributable to the pre-CT ownership period)[1]. Each qualifying immovable property may be elected independently.

References

1. KCM Consultants, Navigating the Shift: UAE Corporate Tax Transitional Provisions (20 June 2026).
2. UAE Ministry of Finance, Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses (Article 61).
3. Federal Tax Authority, Ministerial Decision No. 120 of 2023 on the Adjustments Under the Transitional Rules (16 May 2023).