On 6th November 2023, the UAE Federal Tax Authority (‘FTA’) issued a Corporate Tax Guide on the Interaction of Accounting Standards with Corporate Tax (‘CT’).
The Guide provides a general overview of the following issues:
- Accepted accounting and reporting standards (i.e. International Financial Reporting Standards (‘IFRS’), and IFRS for small and medium sized enterprises if certain requirements are met)
- The basis for the preparation of financial statements of a Tax Group
- Accounting methods (accrual basis vs cash basis)
- The main adjustments to accounting profit or loss to determine the taxable income
- The calculation of the tax basis of assets and liabilities under the transitional rules.
The Guide also provides several examples of the following adjustments:
- Adjustments derived from applying the realisation basis for CT purposes, and tax depreciation
- Adjustments under the transitional rules
- Adjustments due to related party transactions and transfers within a Qualifying Group
- Adjustments derived from gains or losses recorded in the statement of other comprehensive income
- Adjustments to replace the effect of the equity method of accounting, if applied, with the effect of the cost method of accounting for CT.
These examples facilitate the understanding of certain issues where there has historically been some interpretation uncertainty.
Even though the Guide is not legally binding, it will be a source of guidance for better understanding the main CT adjustments related to accounting issues.
Click here to read the full guide.
KPMG has a dedicated Corporate Tax team that will be delighted to help you assess the impact of the updated legislation to your operations and activities.