Do you need to pay corporate tax on the unrealised gains and losses?

Do you need to pay corporate tax on the unrealised gains and losses?

Among the various adjustments to the accounting profits, the adjustment of unrealised gains and losses is critical.

The UAE’s corporate tax law (UAE CT law) requires taxable persons to calculate their taxable profits by applying an indirect approach. The indirect process entails preparing financial statements per applicable accounting standards and adjusting the accounting profits to arrive at the taxable profits.

The adjustments to the accounting profits typically involve adding back expenses not deductible for tax purposes and subtracting expenses not recognised in accounting profits. Conversely, income not subject to UAE CT law should be excluded from accounting profits. The income subject to tax but not part of the accounting profits should be included to arrive at the taxable profits.

Among the various adjustments to the accounting profits, the adjustment of unrealised gains and losses is critical. Under Article 20(3) of the UAE CT law, an option has been given to the taxable person to take into account the gains and losses on a realisation basis related to all assets and liabilities that are subject to fair value or impairment accounting under the applicable accounting standards; or all assets and liabilities held on capital account at the end of a tax period. However, the