Частные разъяснения FTA 2

Corporate Tax – Summary of FTA
Private Clarifications issued up to
May 2026
Exempt Persons – Qualifying Investment Funds, Qualifying Limited Partnerships and REITs
Permanent Establishment
Unincorporated Partnerships
Family Foundations
Free Zones – Qualifying Free Zone Persons
Free Zones – Adequate Substance
Free Zones – Qualifying Income
Transactions with other Free Zone Persons
Income from Qualifying Intellectual Property
Free Zones – Qualifying Activities
Processing of goods or materials
Trading of Qualifying Commodities
Holding of shares and other securities for investment purposes
Ownership, management and operation of ships
Reinsurance services
Wealth and investment management services
Headquarter services to Related Parties
Treasury and financing services to Related Parties or for own account
Financing and leasing of aircraft
Distribution of goods or materials in or from a Designated Zone
Logistics services
Ancillary activities
Taxable Income
Participation Exemption
Allowable Deductions
Losses
Tax Group
Registration
Financial Statements
Tax Period
Transitional Relief
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Exempt Persons – Qualifying Investment Funds, Qualifying Limited Partnerships and REITs
Q Does the Taxable Income of an investor in a Real Estate Investment Trust (REIT) that is a Qualifying
Investment Fund include unrealised gains of the REIT?
A No, the Taxable Income of an investor in a REIT that is a Qualifying Investment Fund is the investor’s share of
the net income available for distribution in the financial statements of the Qualifying Investment Fund1.
This does not include unrealised gains of the fund as unrealised gains cannot be distributed to investors.
Q For a REIT to qualify as a tax-exempt Qualifying Investment Fund2, at least 20% of its shares must be floated
on a Recognised Stock Exchange and the REIT and its Related Parties or Connected Persons must not subscribe
to or purchase any of the floated shares3. Does the requirement for the REIT, Related Parties or Connected
Persons not to subscribe to or purchase any of the floated shares refer to just the 20% shares that are required
to be floated or all the floated shares?
A The requirement only applies to the 20% of shares that must be floated on a Recognised Stock Exchange.
Q Do non-resident investors in a UAE Qualifying Limited Partnership4 need to register for UAE
Corporate Tax and file Tax Returns?
A Not necessarily, investing in a Qualifying Limited Partnership does not create a tax filing obligation for a non-
resident investor where the non-resident investor earns only UAE State Sourced Income5 (and is not
otherwise considered to be a Non-Resident Person).
Q One of the conditions for a Qualifying Limited Partnership6 to be exempt from Corporate Tax is that it must
not have income from UAE immovable property7. However, can it retain its exemption if it invests in other
companies that have income from immovable property?
A Yes, in this situation, the Qualifying Limited Partnership is considered to be investing in shares rather than in
Immovable Property.
Permanent Establishment
Q Does an office of a Non-Resident Person constitute a Permanent Establishment8 in the UAE, if the services
are provided through a third party and not under a separate trade licence, or if the only activities are
marketing activities for a Related Party?
A It depends on the facts and circumstances of each case. A Non-Resident Person has a Permanent
Establishment in the UAE if it has a fixed or permanent place in the UAE through which the business of the
Non-Resident Person, in whole or in part, is conducted. The absence of a trade licence does not necessarily
mean there is no Permanent Establishment. Generally, an aggregate presence of more than six months
1 Article 4(3) of Cabinet Decision No. 34 of 2025
2 Article 10 of the Corporate Tax Law
3 Article 4(1)(b)(1) of Cabinet Decision No. 34 of 2025
4 Article 1 of Cabinet Decision No. 34 of 2025
5 Article 2(1)(e) of Ministerial Decision No. 43 of 2023
6 Article 1 of Cabinet Decision No. 34 of 2025
7 Article 5(1)(b) of Cabinet Decision No. 34 of 2025
8 Article 14 of the Corporate Tax Law
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(even if not continuous) within a relevant 12-month period indicates permanence in time. The place of Business
must be at the disposal of the Non-Resident Person and the activities performed by the Non-Resident Person
at that place of Business must be core income-generating activities and not of a preparatory or auxiliary
nature.
An important factor to distinguish whether activities have a preparatory or auxiliary character is whether
the activity of the fixed place of business in itself forms an essential and significant part of the activity of the
enterprise as a whole. A fixed place of business whose general purpose is identical to the general purpose of the
whole enterprise does not exercise a preparatory or auxiliary activity.
Unincorporated Partnerships
Q Does an Unincorporated Partnership9 exist where a landowner enters into an agreement with a real estate
developer to develop a property and share the profits when the property is sold?
A This will depend on the situation. An Unincorporated Partnership will exist where there is 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 UAE10. The contract can be
a written or oral agreement. If the partnership is carrying out a business, for example, of property
development, then the normal rules apply for registering for Corporate Tax and filing Tax Returns.
Q Can the UAE branch of a foreign Limited Liability Partnership (LLP) be treated as an Unincorporated
Partnership even if the foreign LLP is legally, but not beneficially owned by a nominee company?
A Yes, as long as the conditions in the Corporate Tax Law are met for the Foreign Partnership11 - it must be
treated as tax-transparent in its home country and each partner must be taxable on their share of the
partnership income.
Q Does a Foreign Partnership lose its tax-transparency if it fails to submit an annual declaration to the FTA to
confirm it meets the conditions to be treated as a Foreign Partnership12?
A Yes, a UAE taxable partner in a Foreign Partnership must submit an annual declaration on behalf of the
partnership when filing their Tax Return, and failure to submit the annual declaration means that the Foreign
Partnership loses its tax-transparent nature since it is no longer treated as an Unincorporated
Partnership.
Q Can a UAE branch of an unincorporated foreign partnership be treated as a Foreign Partnership under
Article 16(7) of the UAE Corporate Tax Law?
A No, Article 16(7) only applies to foreign partnerships that are juridical persons, and deems them to be tax-
transparent if certain conditions are met. An unincorporated foreign partnership that is not a juridical person is
already treated as tax transparent by definition, and there is no requirement for an application to be made to the
FTA for this treatment.
9 Article 1 of the Corporate Tax Law
10 Article 1 of the Corporate Tax Law
11 Article 16(7) of the Corporate Tax Law
12 Article 4(3) of Ministerial Decision No. 261
of 2024, Article 8 of FTA Decision No. 5 of 2025
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Family Foundations
Q Can a family company or a private company that invests in shares for the benefit of a natural person be a
Family Foundation for the purposes of the Corporate Tax Law?
A No, a Family Foundation is any foundation, trust or similar entity that meets the conditions of Article 17 of the
Corporate Tax Law13. A “similar entity” means an entity that has a similar legal structure or character to a
foundation or trust, and would, therefore, exclude a limited liability company or a private company, but can
include an incorporated trust.
Q Can a Family Foundation, whose beneficiaries are natural persons, qualify for tax-transparent status if it carries
on an activity of real estate investment14?
A Yes, but only if the real estate investment is not carried on through a licence (and is not required to be
conducted through a licence), as such real estate investment would not be a taxable business activity if
carried on by a beneficiary of the Family Foundation who is a natural person.
Q A juridical person that is wholly owned and controlled by a Family Foundation that is treated as an
Unincorporated Partnership can itself make an application to the FTA to be treated as an
Unincorporated Partnership15. Is this application possible if the juridical person is wholly owned by more than
one such Family Foundation?
A Yes, a juridical person can be “wholly owned” by more than one Family Foundation. The ownership condition
would be met if the juridical person is only owned by Family Foundations, and all these Family Foundations
are treated as Unincorporated Partnerships.
Free Zones – Qualifying Free Zone Persons
Q Can a discretionary trust, Unincorporated Partnership or other such body that is not a juridical person be
a Qualifying Free Zone Person?
A No, a Qualifying Free Zone Person must be a juridical person16, which means, broadly, an entity with a separate
legal identity, and includes branches. It does not include a natural person or an agreement between persons.
Q If a Taxable Person is based in a Free Zone and has a branch in another Free Zone, should the conditions
for a Qualifying Free Zone Person be assessed for each location separately?
A No, a branch of a Taxable Person does not have a separate legal identity, so if a Taxable Person has branches in
one or more Free Zones, then the conditions for a Qualifying Free Zone Person are applied to the Free Zone
branches collectively as one Taxable Person17. Each activity conducted by the Taxable Person should be assessed
independently to determine whether it is a Qualifying Activity and the adequate substance test18 should be
assessed separately for each activity for the Free Zone Person
13 Article 1 of the Corporate Tax Law
14 Article 17(1)(c) of the Corporate Tax Law
15 Article 17 of the Corporate Tax Law and
Article 5(2) of Ministerial Decision No 261 of 2024
16 Article 1 of the Corporate Tax Law
17 Article 3(1) of Cabinet Decision No. 100 of 2023
18 Article 8(1) of Cabinet Decision No. 100 of 2023
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and its branches collectively as a single Qualifying Free Zone Person. However, if a Taxable Person based in a
Free Zone has a branch that is not in a Free Zone, then that branch is treated as a Domestic or Foreign Permanent
Establishment. The income attributable to that Permanent Establishment is calculated as if the establishment
was a separate and independent Taxable Person that is a Related Party of the Qualifying Free Zone Person. Its
income is not Qualifying Income and its activities are not taken into account in assessing the conditions for a
Qualifying Free Zone Person19.
Q If a Taxable Person does not record certain transactions at arm’s length prices in its financial statements,
but makes an appropriate transfer pricing adjustment in its Corporate Tax Return, can it still be a Qualifying Free
Zone Person?
A Yes, where a transfer pricing adjustment is made to the Corporate Tax Return to meet the arm’s length
principle for Related Parties20, a Free Zone Person will not be disqualified from being a Qualifying Free Zone
Person for that Tax Period for not recording arm’s length transactions in its financial statements.
Free Zones – Adequate substance
Q A Free Zone Person rents out property located in a Free Zone to Related Parties in the Free Zone. Can it pass
the adequate substance test21 to be a Qualifying Free Zone Person even if it has no employees?
A The adequate substance test should be applied on a case-by-case basis having regard to the level of activities
carried out, and whether there are adequate assets, an adequate number of qualified full-time employees and an
adequate amount of expenditure in relation to each activity22, and does not provide an exception where an
activity is asset-based or passive in nature. For example, for a business that lets out property, the absence of any
full-time employees may indicate that no personnel are dedicated to performing the core income-generating
activities associated with leasing, such as contract administration, compliance monitoring, oversight of lease
renewals, or enforcement of contractual rights and obligations, and the adequate substance test is not met.
Q Can employees working full-time in a Free Zone, under a Free Zone Person’s control and supervision, but holding
visas from other Related Parties, be qualified full-time employees of the Free Zone Person for the adequate
substance requirement23?
A Yes, the fact that the employees hold work visas issued by other Related Parties does not prevent a Free Zone
Person from meeting the adequate substance requirement of having an adequate number of qualified full-time
employees in a Free Zone, if the Free Zone Person bears the economic expense of the employees and is
responsible for the substance of the employment relationship.
Q Can the adequate substance test24 be met if a Free Zone company has no separate physical office but uses a
shared workspace in a Free Zone to carry out its activities?
A This depends on whether the shared workspace is sufficient for the company to carry out its core income-
generating activities. The space where the Applicant conducts its operations should be commensurate with
its level of Qualifying Activity. The Applicant must have adequate substance
19 Article 5 of Cabinet Decision No. 100 of 2023
20 Article 18(1)(d) and Article 34 of the Corporate Tax Law
21 Article 8(1) of Cabinet Decision No. 100 of 2023
22 Article 8(1) of Cabinet Decision No. 100 of 2023
23 Article 8(1) of Cabinet Decision No. 100 of 2023
24 Article 8(1) of Cabinet Decision No. 100 of 2023
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(adequate assets, an adequate number of qualified full-time employees, and incur an adequate amount of
operating expenditures) in a Free Zone that is commensurate to the level of its activities.
Q Can a Free Zone Person conducting high-seas sales or third-port trading using overseas warehouses be considered
as performing core income-generating activities of the Qualifying Activity of distribution within the Free Zone for
Qualifying Free Zone Person status?
A It depends on the facts and circumstances. Overseas warehousing and shipping would not automatically
disqualify a Free Zone Person from Qualifying Free Zone Person status if the Free Zone Person undertakes its core
income-generating activities in a Designated Zone, and having regard to the level of activities carried out, has
adequate assets and an adequate number of qualified full-time employees in a Designated Zone, and if the Free
Zone Person incurs adequate operating expenditure, in relation to such activity.
Q If a Free Zone Person (not located in a Designated Zone) is a distributor and sells goods to another Free Zone
Person, how can it determine whether that customer is the Beneficial Recipient of the goods, and whether the
income is therefore Qualifying Income of a Qualifying Free Zone Person25?
A Where a sale of goods results in the legal ownership passing to the customer and the goods are at the disposal
and discretion of the customer, including the right to resell the products to its own customers without any
contractual or legal obligation between the distributor and the customer requiring it to do so, the customer is
considered to be the Beneficial Recipient of the goods as the customer has the free right to use and enjoy the
goods.
Q If a Qualifying Free Zone Person carries on a Qualifying Activity of trading in Qualifying
Commodities26 and sells those Qualifying Commodities to another Free Zone Person, do they need to determine
whether that customer was the Beneficial Recipient27 of the goods?
A No, where a Qualifying Free Zone Person sells goods to another Free Zone Person as part of a Qualifying
Activity of trading in Qualifying Commodities, it does not need to determine whether the customer is the Beneficial
Recipient. The Beneficial Recipient test is only relevant when the Qualifying Free Zone Person does not conduct a
Qualifying Activity or an Excluded Activity28, and they have derived income from transactions with another Free
Zone Person.
Q Is income from the sale of goods to a Free Zone Person considered Qualifying Income of a Qualifying Free Zone
Person29 if the goods or materials that give rise to the sales are not purchased from a Free Zone Person?
A Yes, income from the sale of goods to a Free Zone Person who is the Beneficial Recipient of the goods will be
considered Qualifying Income, even where the goods imported or purchased by the Qualifying Free Zone Person
in deriving such Qualifying Income are imported or purchased from Non-Free Zone Persons.
25 Article 3(1)(a) and Article 3(3) of Cabinet Decision
No. 100 of 2023
26 Article 2(c) of Ministerial Decision No. 229 of 2025
27 Article 3(3) of Cabinet Decision No. 100 of 2023
28 Article 3(1)(b) of Cabinet Decision No. 100 of 2023
29 Article 3(1)(a) of Cabinet Decision No. 100 of 2023
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Q Are company formation consultancy services provided by a Free Zone Person considered Qualifying Income of
a Qualifying Free Zone Person30 if they are provided to the individual shareholders of a new company being
formed in a Free Zone?
A This depends on the services provided and who the Beneficial Recipient31 of the services is. If the Beneficial
Recipient is a natural person, then the services are Excluded Activities32, and the income from the services is
not Qualifying Income. If the Beneficial Recipient is a Free Zone Person and the services are not Excluded
Activities, then the income from the services will be Qualifying Income.
Free Zones – Qualifying Income - Income from Qualifying Intellectual Property
Q For income to be considered Qualifying Income under the category of income derived from the ownership
or exploitation of Qualifying Intellectual Property33, is it necessary to secure patent or copyright registration
with the relevant UAE regulatory authority?
A No, the Corporate Tax Law does not require Qualifying Intellectual Property to be registered if the Intellectual
Property is automatically legally protected by the relevant legislation in the UAE upon creation.
Free Zones – Qualifying Activities – processing of goods or materials
Q Can a packaging or re-packaging business be a Qualifying Activity of processing of goods or
materials34?
A Processing of goods or materials is a wider concept than manufacturing and may occur where an item
undergoes a process but essentially remains the same thing, and no new product is created. For example,
packaging for sale or re-packaging of finished products could be a Qualifying Activity of processing.
Free Zones – Qualifying Activities – trading of Qualifying Commodities
Q Is trading of derivatives for speculative purposes a Qualifying Activity of trading of Qualifying
Commodities35?
A No. Trading of Qualifying Commodities means the physical trading of Qualifying Commodities and associated
financial derivatives trading used to hedge against risks involved in such activities, and associated structured
commodity financing.36 Derivative transactions which are not directly linked to hedging risk in physical
commodity trading, conducted on a speculative basis, do not fall within the Qualifying Activities of Trading of
Qualifying Commodities. The Free Zone Person must be able to demonstrate a clear link between the
financial derivatives entered into and the risks arising from its physical trading of Qualifying Commodities.
Q A Qualifying Activity of trading in Qualifying Commodities requires a Quoted Price to exist for the
commodities37. Can the price of cash-settled derivatives of a commodity, specified by a Recognised Commodity
Exchange Market, be referenced as a valid source of the Quoted Price?
30 Article 3(1)(a) of Cabinet Decision No. 100 of 2023
31 Article 3(3) of Cabinet Decision No. 100 of 2023
32 Article 2(2)(a) of Ministerial Decision No. 229 of 2025
33 Article 3(1)(c) of Cabinet Decision No. 100 of 2023
34 Article 2(1)(b) of Ministerial Decision No. 229 of 2025
35 Article 2(1)(c) of Ministerial Decision No. 229 of 2025
36 Article 2(3)(c) of Ministerial Decision No. 229 of 2025
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A Yes, the price of a cash-settled derivative of a commodity meets the condition to show the existence of a Quoted
Price for that commodity, provided that price is specified by a Recognised Commodity Exchange Market or a
recognised price reporting agency38.
Free Zones – Qualifying Activities - holding of shares and other securities for investment
purposes
Q Can income from the holding of shares and other securities for investment purposes39 be a Qualifying
Activity if the shares are held for less than 12 months? If yes, in what circumstances is this permissible?
A Yes, if the shares were acquired for investment purposes rather than for short-term trading or speculative
activity, and the taxpayer can demonstrate that the intention was to hold the shares for at least 12 months40.
Where funds are placed with an asset manager with a discretionary mandate to hold shares and other securities
for investment purposes, that would be indicative (although not determinative) that the Qualifying Free Zone
Person meets the investment purpose requirement for the funds that are placed at the portfolio level, provided
the Qualifying Free Zone Person exercises ongoing prudential oversight to ensure that the asset manager acts
within the scope of its investment mandate and the Qualifying Free Zone Person does not act in contradiction to
the investment strategy mandate agreed with the asset manager. The assessment of the “intention” of the
investments will be at the level of the overall portfolio mandate, rather than separately for each individual
acquisition or disposal.
Q Can dealing in option contracts as an option writer (as opposed to an option holder) be a Qualifying Activity of
holding of shares and other securities for investment purposes41?
A No, dealing in option contracts as an option writer is not a Qualifying Activity as the option writer is not the
holder of the option.
Free Zones – Qualifying Activities – ownership, management and operation of ships
Q Can time chartering without direct ownership of ships be a Qualifying Activity of ownership,
management and operation of ships42?
A Yes, a Free Zone Person does not need to own, manage, and operate a ship simultaneously in order to fall
within the scope of the Qualifying Activity. Rather, each limb of the activity i.e. ownership of ships,
management of ships, and operation of ships, can be performed independently and still constitute a
Qualifying Activity, provided the relevant functions are substantively carried out by the Free Zone Person.
Q Are port agency services and cargo handover services a Qualifying Activity of ownership,
management and operation of ships, even if the ships are owned by other persons?43
A Yes. Each activity listed in the definition of the Qualifying Activity44, i.e. ownership of ships, management
37 Article 1 of Ministerial Decision No. 229 of 2025
38 Article 1 Ministerial Decision No. 230 of 2025
39 Article 2(3)(d) of Ministerial Decision No. 229 of 2025
40 Article 2(3)(d) of Ministerial Decision No. 229 of 2025
41 Article 2(3)(d) of Ministerial Decision No. 229 of 2025
42 Article 2(3)(e) of Ministerial Decision No. 229 of 2025
43 Article 2(3)(e) of Ministerial Decision No. 229 of 2025
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of ships, and operation of ships, can be performed independently. Port services and cargo handover services
come within the scope of management and operation of ships.
Q Is the purchase and sale of ships a Qualifying Activity of ownership, management and operation of Ships45?
A No, the purchase and sale of ships is not by itself a Qualifying Activity of ownership, management and operation
of Ships, but it may be an ancillary activity of this type of Qualifying Activity where the Qualifying Free Zone
Person also conducts the Qualifying Activity of ownership, management and operation of Ships.
Free Zones – Qualifying Activities - reinsurance
Q Can an activity be a Qualifying Activity of reinsurance if the Free Zone Person does not bear any insurance
risk?
A No, in order to qualify under the Qualifying Activity of reinsurance services46, the Free Zone Person should
assume all or part of the risk undertaken by another insurer or reinsurer.
Free Zones – Qualifying Activities – wealth and investment management services
Q Can commission and referral fees received from third party financial firms qualify as income from a Qualifying
Activity of wealth and investment management services47?
A It depends on the circumstances. Wealth and investment management services should be of a holistic
advisory or financial management nature, rather than of an executionary nature (i.e. facilitation services
involving implementing investment strategies)48. Where a Free Zone Person provides wealth and investment
management services to clients, the revenue derived from those services does not need to be received from
those clients, but may be received from financial institutions in which clients have invested. Services that
involve acting as a broker or intermediary executing trades on behalf of clients are not a Qualifying Activity
of wealth and investment management services, but may qualify as an ancillary activity to a wealth and investment
management services where the Qualifying Free Zone Person also conducts the Qualifying Activity of wealth and
investment management services49.
Q Does the Qualifying Activity of wealth and investment management services include matched-principal
brokerage services, where financial trades are only executed when both buy and sell sides are matched, and
commission income is earned on matched trades?
A No, these types of brokerage services on their own are not a Qualifying Activity of wealth and investment
management, but they could be an ancillary activity of such a Qualifying Activity where the Qualifying Free Zone
Person also conducts the Qualifying Activity of wealth and investment management services.
Free Zones – Qualifying Activities – headquarter services to Related Parties
Q What types of services provided to Related Parties can be considered to be “headquarter services”50?
44 Article 2(3)(e) of Ministerial Decision No. 229 of 2025
45 Article 2(3)(e) of Ministerial Decision No. 229 of 2025
46 Article 2(3)(f) of Ministerial Decision No. 229 of 2025
47 Article 2(3)(h) of Ministerial Decision No. 229 of 2025
48 Article 2(3)(h) of Ministerial Decision No. 229 of 2025
49 Article 2(4) of Ministerial Decision No. 229 of 2025
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A Headquarter services to Related Parties includes the administering, overseeing and managing of Business
Activities of Related Parties, including the provision of senior and general management, captive insurance
services, administrative services, procurement services, business planning and development, risk
management, coordination of group activities, and in general incurring expenditures on behalf of
Related Parties and providing other support services to Related Parties51. Not all the activities listed need to
be conducted, any one of the categories on its own could be a Qualifying Activity of headquarter services. A
headquarter company should take the responsibility for the overall success of the group, or an important
aspect of the group’s performance, and ensure corporate governance. This will need to be assessed on a case-
by-case basis, depending on the specific facts and circumstances of the case. Where a company provides a
straightforward specific commercial service to a Related Party, such as providing routine IT support or
providing marketing services (as opposed to providing overall group management services), for the benefit of
a single group entity rather than for the wider group, this is not likely to be a Qualifying Activity of headquarter
services.
Q Does the Qualifying Activity of headquarter services to Related Parties52 include services provided to only
one Related Party?
A Generally yes, depending on the particular characteristics of each case, there could be no need to provide
headquarter services to more than one Related Party for these to be a Qualifying Activity of headquarter
services to Related Parties, where those services are provided for the wider benefit of the group.
Q Does the Qualifying Activity of headquarter services to Related Parties53 include the self-investment of a
company’s own funds to provide financing for related companies?
A No, headquarter services must be provided for Related Parties, not just for the company with the activity.
However, this type of financing activity could be a Qualifying Activity under the different Qualifying Activity
of providing treasury and financing services to Related Parties54.
Q Does the Qualifying Activity of headquarter services to Related Parties55 include services provided by a
branch located in a Free Zone to its headquarters?
A Yes, a branch can be a Free Zone Person56 and can carry out any Qualifying Activities. Whilst a branch does not
constitute a separate legal entity from its headquarters, but rather it is an extension of the headquarters, a
headquarters and its branch (i.e. its Permanent Establishment) are considered to be Related Parties, and
therefore the branch can provide headquarter services to its headquarters.
Free Zones – Qualifying Activities - treasury and financing services to Related Parties or
for own account
Q Is providing loans, payment processing services and acting as a loan guarantor for Related Parties a Qualifying
Activity of treasury and financing services to Related Parties57?
50 Article 2(3)(i) of Ministerial Decision No. 229 of 2025
51 Article 2(3)(i) of Ministerial Decision No. 229 of 2025
52 Article 2(3)(i) of Ministerial Decision No. 229 of 2025
53 Article 2(3)(i) of Ministerial Decision No. 229 of 2025
54 Article 2(3)(j) of Ministerial Decision No. 229 of 2025
55 Article 2(3)(i) of Ministerial Decision No. 229 of 2025
56 Article 1 of the Corporate Tax Law
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A Yes, all these services are directly aligned with functions such as cash and liquidity management, financing,
debt management, financial risk management, and centralised payment and collection activities which come
within the definition of treasury and financial services.58
Q Is the investment of a group parent company’s funds into interest bearing bank deposits, US treasuries
and corporate bonds a Qualifying Activity of treasury and financing services to Related Parties or for its own
account59?
A Yes. Investment (either short-term or long-term) of free funds into these types of investment are a Qualifying
Activity of treasury and financing services.
Free Zones – Qualifying Activities – financing and leasing of aircraft
Q Does the Qualifying Activity of financing and leasing of aircraft60 include activities where aircraft are leased to
natural persons rather than companies?
A Yes, transactions with natural persons in respect of the Qualifying Activity of financing and leasing of Aircraft
are not an Excluded Activity. Therefore, whether the customer is a company or a natural person is not a factor
in determining whether there is a Qualifying Activity of financing and leasing of aircraft.
Free Zones – Qualifying Activities – distribution of goods or materials in or from a Designated
Zone
Q For the Qualifying Activity of distribution of goods or materials in or from a Designated Zone61, do goods
need to be purchased from the manufacturer or can they be purchased from another distributor?
A There is no obligation or requirement under the Corporate Tax Law for goods to be purchased only from
manufacturers in order to be eligible as the Qualifying Activity of distribution of goods or materials in or
from a Designated Zone.
Q Does the Qualifying Activity of distribution62 include activities where goods or materials are distributed
from a Designated Zone to a customer who incorporates them in its own products, which are either processed
and sold on to third parties or retained by the customer to provide services to third parties?
A As long as the goods or materials are incorporated in products that are sold on to third parties, the activity
can qualify as a distribution activity, regardless of how much processing is done by the customer prior to
sale. However, if the goods or materials are incorporated by the customer into products, infrastructure or
machines that it retains and uses to provide services, then the customer is the “end-user” of the goods or
materials, and the activity will not be a Qualifying Activity of distribution63.
57 Article 2(3)(j) of Ministerial Decision No.229 of 2025
58 Article 2(3)(j) of Ministerial Decision No.229 of 2025
59 Article 2(3)(j) of Ministerial Decision No.229 of 2025
60 Article 2(3)(k) of Ministerial Decision No. 229 of 2025
61 Article 2(3)(l) of Ministerial Decision No. 229 of 2025
62 Article 2(3)(l) of Ministerial Decision No. 229 of 2025
63 Article 2(3)(l) of Ministerial Decision No. 229 of 2025
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Q A UAE Free Zone Person buys raw materials abroad and pays a Related Party abroad to manufacture garments
from the materials which are then sold by the UAE Free Zone Person to customers outside the UAE. The materials
and garments do not enter the UAE. Is this a Qualifying Activity of distribution of goods or materials in or from a
Designated Zone64?
A No, the activity is not a distribution activity (the purchase and sale for the purpose of resale). It is a
manufacturing activity, carried out abroad, not from a Free Zone, so it is not a Qualifying Activity.
Q Does the pricing mechanism agreed with a customer for a distribution activity affect its status as a Qualifying
Activity of distribution of goods or materials in or from a Designated Zone65?
A No, the pricing mechanism has no bearing on the conditions for an activity to be a Qualifying Activity of
distribution of goods or materials in or from a Designated Zone.
Q The Qualifying Activity of distribution of goods or materials requires commercial customers to resell products to
third parties and not be “end users”66. What due diligence should a company carry out to determine whether its
customers are “end users” of its products, or resellers to third parties?
A A Free Zone Person that is engaged in the activity of distribution of goods or materials must conduct necessary
due diligence (such as “know your client”, seeking confirmation by way of an undertaking or a contract, etc.) to
ensure that its customer is not the end user, in order to fall within the scope of the Qualifying Activity.
Free Zones – Qualifying Activities – logistics
Q The definition of the Qualifying Activity of logistics67 includes the storage and transportation of goods or
materials on behalf of another person without taking title to the good or material of that other person, including
cargo handling, warehousing, container storage, transport agency services, customs brokerage services, order
and inventory management, freight forwarding and brokerage services, document preparation, packing and
unpacking and other related services. Do all these activities need to be carried out for a Qualifying Activity of
logistics to exist?
A No, a Taxable Person does not need to carry out every activity on the list to undertake the Qualifying Activity of
logistics. For example, there is no requirement for the Taxable Person to be engaged in the direct physical storage
or transportation of goods as long as other logistics activities are carried out.
Q Are first and last mile delivery services a Qualifying Activity of logistics68, even though the services may not be
carried out in a Free Zone?
A Yes, where a Free Zone Person performs most of its logistics services within a Free Zone for its customers
but provides first or last mile delivery services outside of the Free Zone in the UAE or in a foreign country, the last
mile delivery services will still form part of the Free Zone Person’s logistics services Qualifying Activity.
Q Is the arrangement of transportation and storage for customers a Qualifying Activity of logistics69, even if the
transportation and storage is carried out by third party vendors?
64 Article 2(3)(l) of Ministerial Decision No.229 of 2025
65 Article 2(3)(l) of Ministerial Decision No. 229 of 2025
66 Article 2(3)(l)(1) of Ministerial Decision No. 229 of 2025
67 Article 2(3)(m) of Ministerial Decision No. 229 of 2025
68 Article 2(3)(m) of Ministerial Decision No. 229 of 2025
69 Article 2(3)(m) of Ministerial Decision No. 229 of 2025
12
A It depends on the facts and circumstances of each case, but the fact that the actual logistics services are provided
by third party vendors does not prevent an activity being a Qualifying Activity of logistics provided those activities are
not core income-generating activities70.
Free Zones – Qualifying Activities – ancillary activities
Q What are the requirements for an ancillary activity71 to be a Qualifying Activity?
A There must be a main Qualifying Activity under one of the other categories, and the ancillary activity must be
necessary for the performance of the main activity or makes a minor contribution to it and is so closely related to
the main activity that it should not be regarded as a separate activity.72 Whether an activity is necessary, or is
closely related to the main activity will depend on the specific facts and circumstances. Some of the features
associated with activities that are necessary for the performance of a main Qualifying Activity, and are therefore
ancillary activities, are:
(i) Support to main activity: An activity is ancillary if it serves as a necessary supportive function to the main
operation of the Business rather than being a core activity or function itself.
(ii) Seamlessly integrated: An activity is ancillary if its absence would disrupt the main operation (i.e. it is integral
to the main operation and cannot be detached without materially affecting the functioning of the main
operations).
Generally, the assessment of whether a contribution is minor should be based on the financial contribution of
the activity when compared with the total revenue of the business.
Taxable Income
Q A company has a 1% legal ownership interest in another company to comply with UAE Commercial Companies
law, but the shareholding has no economic value such as rights to dividends or liquidation proceeds. If the company
disposes of the 1% shareholding to a Related Party or if the 1% shareholding is liquidated, does this give rise to
Taxable Income?
A The transfer, sale or liquidation of legal ownership in shares is a taxable event and the company is required to
determine if such transaction gives rise to Taxable Income. Taxable Income includes all income recognised in the
Financial Statements prepared in accordance with IFRS73. If the shares are disposed of to a Related Party, the
transaction must be valued at arm’s length74. Where the company only holds legal ownership in the shares without
any associated economic rights or benefits, such as entitlement to dividends, profits, liquidation proceeds, or
control over the other company, this may indicate that the arm’s length value of such legal ownership is nominal or
aligned with the book value of the shares. In such a case, the transfer of the legal ownership may not result in any
income that would be subject to Corporate Tax. If the shareholding is liquidated, there may be Taxable Income for
the company owning the 1% shareholding, but only if it is entitled to a share of the liquidation proceeds. This
assessment is fact-specific and based on the assumption that the company holds only legal title to the shares
without any associated economic rights or benefits. The arm’s length value of the shareholding must be
70 Article 2(3)(m) of Ministerial Decision No. 229 of 2025
71 Article 2(3)(n) of Ministerial Decision No. 229 of 2025
72 Article 2(4) of Ministerial Decision No .229 of 2025
73 Article 20(1) of the Corporate Tax Law
74 Article 34(1) of the Corporate Tax Law
13
determined having regard to all relevant facts and circumstances. The presence of additional rights, benefits,
obligations, restrictions, or other valuation factors may result in a different valuation and Corporate Tax outcome.
Q Does Taxable Income include the reversal of a provision that was originally created before the first Tax Period?
A Yes, Taxable Income includes all income recognised in financial statements prepared in accordance with IFRS75,
subject to any exemptions in the Corporate Tax Law (i.e. if it is Exempt Income). If the reversal of a provision is
recognised as income under IFRS, then it is Taxable Income even if the provision originally arose before the
first Tax Period.
Q Does Taxable Income include receipt of a compensation amount that relates to events prior to the first Tax
Period but which was included in financial statements for the first Tax Period?
A Yes, Taxable Income includes all income recognised in financial statements prepared in accordance with IFRS76.
If the compensation is correctly recognised as income under IFRS, then it is Taxable Income, even if the
events that gave rise to it occurred before the first Tax Period.
Q Should a government grant be included in Taxable Income?
A It depends on the treatment of the grant under IFRS. Taxable Income includes all accounting income recognised in
financial statements prepared in accordance with IFRS77, subject to any exemptions in the Corporate Tax Law.
Participation Exemption
Q Can the Participation exemption78 apply to dividends received from a Saudi company that is subject to Zakat at
2.5%?
A Yes, on the basis that the corporate tax levied in KSA is applied on a similar basis to Corporate Tax in the UAE
and is levied at the rate of 20%, the requirement79 for the Participation to be subject to Corporate Tax or a tax of
a character similar to Corporate Tax at a rate of 9% or more is considered to be met for companies subject to Saudi
Zakat.
Q Can the Participation exemption80 apply to dividends received from a holding company taxed at less than 9% if
the ultimate source of the income is a company taxed at 9% or more?
A Yes. There are special rules that allow a foreign holding company taxed at less than 9% to be treated as a
Participation as long as certain conditions are met. The holding company must have the principal objective and
activity of holding shares or equitable interests that meet the conditions of the Participation exemption81
and it must:
a. Be directed and managed in the relevant other country or foreign territory.
b. Comply with the requirement to submit any documents, records or information to the relevant authority
under the laws and regulations applicable to the Participation in the relevant other
country or foreign territory.
14
75 Article 20(1) of the Corporate Tax Law
76 Article 20(1) of the Corporate Tax Law
77 Article 20(1) of the Corporate Tax Law
78 Article 23 of the Corporate Tax Law
79 Article 23(2)(b) of the Corporate Tax Law
80 Article 23 of the Corporate Tax Law
81 Article 23(3) of the Corporate Tax Law
c. Have adequate personnel and premises for the acquisition and holding of the shares or equitable interests in
the relevant other country or foreign territory, having regard to the level of activity carried on by the
Participation and the extent to which those activities are performed on behalf or for the benefit of the
Participation by another Person in that other country or foreign territory.
d. Not conduct any other activities other than those that are incidental or ancillary to the acquisition and holding
of shares or equitable interests.
e. Have 50% or more of its income during the relevant Tax Period and the preceding Tax Period on average
consisting of dividends, capital gains and other income from Participating Interests.82
Q Does the Participation exemption83 apply to unrealised fair value gains or losses, if a Taxable Person has not
made an application to be taxed on the realisation basis84?
A Fair value gains or losses are not covered by the Participation exemption, but impairment gains or losses are
covered. Whether or not the movement in the valuation of an item is an impairment gain or loss or a fair value
gain or loss should be determined by reference to IFRS.
Q Does the AED 4,000,000 minimum ownership requirement85 for the Participation exemption86
override the 5% entitlement tests for profits available for distribution and liquidation proceeds87?
A Yes, the minimum ownership requirement of AED 4,000,000 overrides the 5% ownership test in shares or
capital88 as well as the 5% entitlement tests for profits and liquidation proceeds. This applies to income derived
from a Participation for all Tax Periods starting on or after 1 June 2023.
Q The asset test for the Participation exemption89 states that a Participation does not qualify for the Participation
exemption if more than 50% of the Participation’s direct and indirect assets consists of ownership interests that
by themselves would not qualify for the Participation exemption if held directly by the Taxable Person.
Ministerial Decision No. 302 of 2024 limited this test to Participations that are Related Parties90 of the Taxable
Person91. Does this limitation apply to all Tax Periods, or just those starting on or after 1 January 2025?
A The limitation of the asset test to Related Parties of the Taxable Person applies only for Tax Periods starting on
or after 1 January 2025.
Q Is it compulsory or optional to aggregate the ownership interests held by members of a Qualifying Group for
the purposes of determining whether a Participation exists92?
A For the purposes of establishing whether a 5% ownership interest in a Participation exists, the aggregation
of ownership interests held by members of a Qualifying Group is compulsory.
82 Article 7 of Ministerial Decision No. 302 of 2024
83 Article 23 of the Corporate Tax Law
84 Article 20(3) of the Corporate Tax Law
85 Article 8(1) of Ministerial Decision No. 302 of 2024
86 Article 23 of the Corporate Tax Law
87 Article 23(2)(c) of the Corporate Tax Law
88 Article 23(2) of the Corporate Tax Law
89 Article 23(2)(d) of the Corporate Tax Law
90 Article 35 of the Corporate Tax Law
91 Article 9 of Ministerial Decision No. 302 of 2024
92 Article 23 (2) of the Corporate Tax Law, Article 3 of
Ministerial Decision No. 302 of 2024
15
Q Can a dividend be exempt under the Participation exemption93 if it is paid out of profits that arose before the
acquisition of a Participation?
A Yes, dividends sourced from retained earnings accumulated in financial years prior to the acquisition of a
Participation qualify for the Participation exemption if all the other qualifying conditions are met.94
Q Can a 5% beneficial ownership without strict legal ownership qualify for the Participation exemption95?
A Yes, an ownership interest must have the following characteristics in order to be a Participating Interest:
• It must include a right that entitles the owner to receive profits and liquidation proceeds; and it must be
classified as equity interest under the Accounting Standards as applied by the Taxable Person holding the
ownership interest; or
• The ownership interest must be controlled by the Taxable Person and the Taxable Person must have the right
to the economic benefits produced by the ownership interest under the Accounting Standards as applied by the
Taxable Person.
Allowable deductions
Q Is interest an allowable expense if it is paid by a company to a natural person, such as a connected person of the
company96?
A Interest is an allowable expense97, whether it is paid to a natural person or another company (subject to the general
and specific interest deduction limitation rules). As long as the terms are arm’s length and the general deductibility
rules in the Corporate Tax Law are met, then the Interest is normally allowable.
Losses
Q Is the 75% common ownership test for losses to be transferred between Taxable Persons98 based on legal
ownership or beneficial ownership?
A Beneficial ownership (as opposed to legal ownership) held by a third person is sufficient to meet the ownership test
for the transfer of losses between Taxable Persons. Beneficial ownership is satisfied when the following conditions
are met:
• The Person holding the ownership interest has the right to the economic benefits produced by the ownership
interest (profits and liquidation proceeds).
• The ownership interest is recognised as an equity interest under the accounting standards used by the Person
holding the ownership interest, or would have been treated as an equity interest if that Person had applied
Accounting Standards acceptable in the UAE.
• The ownership interest must be controlled by the Person holding the ownership interest.
93 Article 23 of the Corporate Tax Law
94 Article 23 of the Corporate Tax Law and
Ministerial Decision No. 302 of 2024
95 Article 23 of the Corporate Tax Law
96 Article 36(2) of the Corporate Tax Law
97 Article 29 of the Corporate Tax Law
98 Article 38(1)(c) of the Corporate Tax Law
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Q How is the 75% common ownership test99 applied for losses transferred between Taxable Persons whose Tax
Periods end on the same day but do not start on the same day?
A For losses to be transferred between Taxable Persons, the Tax Periods of the transferor and transferee
must end on the same day but they do not need to start on the same day. The 75% continuous ownership
condition must be met throughout the Tax Period in which the Tax Loss is incurred by the transferor, until the
end of the Tax Period of the transferee in which the Tax Loss is offset against Taxable Income100. For example, if
the transferor has a Tax Period from 1 April to 31 December 2024, and the transferee a Tax Period for the 12
months to 31 December 2024, then the 75% ownership condition must be met throughout the period from 1 April
to 31 December 2024.
Tax Group
Q Can a Tax Group101 be formed by subsidiary companies of a Government Entity102 or a Government Controlled
Entity103?
A Yes, one or more subsidiaries in which a Government Entity directly or indirectly owns at least 95% of the share
capital and voting rights and is entitled to at least 95% of the subsidiaries’ profits and net assets may form a Tax
Group by appointing any one of the subsidiaries as the representative Parent Company of the Tax Group104. This
subsidiary must be subject to Corporate Tax.
Q If a newly set-up subsidiary company has a Tax Period that ends on the same date as the parent company,
but starts on a different date, can it be part of a Tax Group for that Tax Period?
A Yes, a newly established company may join an existing Tax Group from the date of its incorporation if the
conditions of Article 40(1) of the Corporate Tax Law are met from the date of incorporation and provided the end
date of the Financial Year of the newly set-up subsidiary joining the Tax Group is the same as that of the other
members of the Tax Group105.
Registration for Corporate Tax
Q Does a juridical person need to register for Corporate Tax even if it has no trade licence and is not carrying on a
Business?
A Yes, a juridical person without a trade licence and that is not carrying on a Business must still register for
Corporate Tax106 and file Corporate Tax Returns, unless they are an Exempt Person.
Q Does an incorporated partnership need to register for Corporate Tax?
A Yes, an incorporated partnership is a juridical person and must register for Corporate Tax107.
Q If a business operated by a sole establishment converts its legal status to a Limited Liability Company (LLC), can the
business continue using its existing Corporate Tax TRN (Tax Registration Number)?
99 Article 38(1)(c) of the Corporate Tax Law
100 Article 38(1)(d) of the Corporate Tax Law
101 Article 40 of the Corporate Tax Law
102 Article 4(1)(a) of the Corporate Tax Law
103 Article 4(1)(b) of the Corporate Tax Law
104 Article 40(2) of the Corporate Tax Law
105 Article 5(5)(a) of Ministerial Decision No. 301 of 2024
106 Article 51 of the Corporate Tax Law
107 Article 51 of the Corporate Tax Law
17
A No, a sole establishment does not have a legal personality that is independent of its owner, and is therefore
considered to be the same Taxable Person as its owner. However, the LLC is considered as a distinct and separate
legal person from its owner. As the LLC is a different Taxable Person, the sole establishment will need to de-
register for Corporate Tax (assuming the owner has no other Business carried on as a natural person) and the LLC
will need to register for Corporate Tax108.
Q A Business is carried on by a natural person with a trade licence as a sole establishment. If the natural person
dies, and the Business is carried on by the heirs under the same trade licence, does the Business need to de-register
and register for Corporate Tax as a new establishment?
A A Business carried on by a natural person ceases on the death of its owner, and must de-register from
Corporate Tax. The treatment of the Business carried on by the heirs will depend on the agreement between
them. If the relationship constitutes an Unincorporated Partnership109, then the partners (i.e., the heirs) must
appoint one of them to act as the authorised partner on behalf of all partners and register the Unincorporated
Partnership with the FTA for Corporate Tax purposes.
Q Does a US company with a branch in the UAE need to register for Corporate Tax if its income is exempt under
an international agreement between the USA and the UAE?
A Yes, all non-resident companies110 with a permanent establishment in the UAE111 need to register for Corporate
Tax112 and file Corporate Tax Returns113, even if their income is Exempt Income under an international
agreement114. Where the activities conducted by the Applicant fall into the scope of Exempt Income, the gross
income generated from these activities would not be subject to Corporate Tax.
Q Do Jointly Owned Properties set up and licensed under Dubai Law need to register for Corporate Tax, even
though they are not juridical persons and have no independent legal personality?
A No, such entities are not juridical or natural persons so do not need to register for Corporate Tax115. However,
management entities that are set up as juridical persons to manage Jointly Owned Properties must register
for Corporate Tax and file Tax Returns of their income based on financial statements prepared according to IFRS.
Q An Owners’ Association set up under Abu Dhabi Law is classified as a non-profit entity established to manage
and oversee a building on behalf of all individual property owners, and is registered as a sole proprietorship LLC.
Does it need to register for Corporate Tax?
A Yes, an Owner’s Association must register for Corporate Tax116 if it is a juridical person with a separate legal
personality to its owners, founders and directors, such as a sole proprietorship LLC.
Q Does a natural person who has a Business that buys and sells real estate and also derives rental income,
where both activities have trade licences, need to register for Corporate Tax117?
108 Article 52(1) of the Corporate Tax Law
109 Article 1 of the Corporate Tax Law
110 Article 11(4) of the Corporate Tax Law
111 Article 14 of the Corporate Tax Law
112 Article 51 of the Corporate Tax Law
113 Article 53 of the Corporate Tax Law
114 Article 66 of the Corporate Tax Law
115 Article 1, Article 51(1) and Article 66 of the Corporate Tax Law
116 Article 1 and Article 51(1) of the Corporate Tax Law
117 Article 51 of the Corporate Tax Law
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A A natural person who operates a Business with a trade licence will need to register for Corporate Tax if the
revenue from the Business exceeds AED 1 million in a calendar year to 31 December118.
Financial Statements
Q Can a Taxable Person calculate their Taxable Income based on financial statements prepared according to
foreign accounting standards?
A No, for Corporate Tax purposes, Taxable Income for a Tax Period must be based on financial statements
for the period prepared according to IFRS, IFRS for SMEs (if revenue is AED 50 million or less) or cash basis
(optional if revenue is AED 3 million or less)119.
Q Can the requirement for financial statements to be audited120 be satisfied by an overseas auditor?
A No, where the Corporate Tax Law requires audited financial statements, the auditor must be a UAE auditor
registered with the UAE Ministry of Economy, who is a Chartered Accountant or accounting firm practising an
auditing or accounting profession within the UAE.
Q In the case of an investment business, is the AED 50 million minimum revenue threshold121 for audited
financial statements based on gross or net revenue?
A The threshold follows the accounting treatment under IFRS and is based on the revenue recorded in the
financial statements. For trades in securities and investments, the threshold is based on the total of the gains
from the sale of the investments/securities. The gains are calculated in accordance with IFRS 9 as the gross
proceeds less the cost of the investments/securities, (where the gross proceeds are higher than the cost of the
investments/securities). Any losses (where the gross proceeds are lower than the cost of the investments/securities)
are disregarded because they are not included as income in the statement of profit or loss.
Tax Period
Q If a natural person prepares financial statements to 31 March each year, will their Tax Period also be the year
ending on 31 March?
A No, a natural person can only have a Tax Period ending on 31 December. A natural person is subject to Corporate
Tax only where the business revenue exceeds AED 1,000,000 within a Gregorian calendar year to 31 December122.
Accordingly, assessing whether the natural person is subject to Corporate Tax must be determined on a per
calendar year basis and the Tax Period of a natural person is the Gregorian calendar year to 31 December.
Transitional Relief
Q Can an election for transitional relief123 in respect of Qualifying Immovable Property be made for property
classified as inventory under IFRS accounting standards?
118 Cabinet Decision No. 49 of 2023
119 Article 20(1) of the Corporate Tax Law and Ministerial Decision No. 114 of 2023
120 Article 54(2) of the Corporate Tax Law and Ministerial Decision No. 84 of 2025
121 Article 54(2) of the Corporate Tax Law and Ministerial Decision No. 84 of 2025
122 Article 2(1) of Cabinet Decision No. 49 of 2023
123 Article 61(1) of the Corporate Tax Law and Article 2 of Ministerial Decision No. 120 of 2023 124
Article 61(1) of the Corporate Tax Law and Article 2 of Ministerial Decision No. 120 of 2023
19
A Yes, the classification of Qualifying Immovable Property under IFRS accounting standards is not relevant to
the availability of transitional relief124. Provided the property falls within the definition of Immovable Property,
the adjustment under the transitional rules would apply to the “Qualifying Immovable Property” element of
such Immovable Property.
Q Can an election for transitional relief in respect of Qualifying Immovable Property125 be made for a
development project as a whole?
A Yes, in the case of real estate development projects, each Qualifying Immovable Property can be either the
entire project or specific unit(s) within the project. The adjustment under the transitional rules will follow the
basis of realisation of accounting profits in relation to each Qualifying Immovable Property. The adjustment
under the transitional rules can be made on the basis of each Qualifying Immovable Property (being the
entire project). The timing of the adjustment should follow the recognition of accounting profits in relation
to the entire project. If projects are split into types of properties, for example, a townhouse community and
villa community, and these are accounted for separately, the timing of the adjustment under the transitional
rules should follow the recognition of accounting profits in relation to the types of properties, and each type of
property can be considered a Qualifying Immovable Property.
Q If the disposal of Qualifying Immovable Property results in a tax loss after adjusting for the excluded gain in
accordance with transitional relief126, can such a loss be carried forward to the next Tax Period?
A No, transitional relief is limited to the accounting profit on a property disposal and cannot give rise to a tax
loss127. Only the accounting profits attributable to the Qualifying Immovable Property element in the relevant Tax
Period can be reduced by the excluded or pre-Corporate Tax gain (the difference at the start of the first Tax
Period between the Market Value of the Qualifying Immovable Property and the higher of its original cost or
net book value) of the same Qualifying Immovable Property.
Q For the purposes of transitional relief128 for real estate developments, does a disposal or deemed disposal
include the event when profits are released to the statement of profit and loss?
A The meaning of “disposal” or “deemed disposal” follows IFRS accounting principles. Where revenue is
recognised based on the percentage of completion of a development project in line with IFRS 15, the Taxable
Person makes a disposal or deemed disposal of a Qualifying Immovable Property in the Tax Period(s) in which
the revenue, and the associated costs, including land costs and construction costs, are released to the
statement of profit and loss.
Q What is an acceptable methodology for calculating transitional relief for Qualifying Immovable Property129
if the market value method is chosen?
A The methodology for calculating the relief for immovable property using the market value method is set out
in FTA Public Clarification CTP009/2025.
125 Article 61(1) of the Corporate Tax Law and Article 2 of Ministerial Decision No. 120 of 2023
126 Article 61(1) of the Corporate Tax Law and Article 2 of Ministerial Decision No. 120 of 2023
127 Article 61(1) of the Corporate Tax Law and Article 2 of Ministerial Decision No. 120 of 2023
128 Article 61(1) of the Corporate Tax Law and Article 2 of Ministerial Decision No. 120 of 2023
129 Article 61(1) of the Corporate Tax Law and Article 2 of Ministerial Decision No. 120 of 2023
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Thank You!