Key elections for your first tax return
Consulting an experienced tax agent ensures that your tax strategy is well-informed
The first UAE corporate tax return requires businesses to make certain strategic elections that can significantly influence their tax obligations.
Certain irrevocable elections to be made in the first tax return are as follows:
• Realisation basis for gains or losses: Businesses can opt to compute tax liability on a realisation basis for all assets or liabilities, or capital assets or liabilities. While this election does not lead to any tax savings, it can help optimise the cashflow of your business.
• Adjusting taxable income for gains recognised on a qualifying immovable property or qualifying intangible asset owned prior to the first tax period: This election allows taxable persons to avoid paying taxes on gains of certain assets held on the date of entering into their first tax period.
This election permits these pre-corporate tax regime gains to be excluded from tax when the assets are ultimately sold in any upcoming tax periods.
• Adjusting taxable income for gains or losses on financial assets and/or financial liabilities owned prior to the first tax period: A taxable person may omit any gains or losses generated from the sale of qualifying financial assets and/or liabilities, assuming these assets or liabilities were sold at their market value, with the net book value serving as the cost basis at the beginning of the initial tax period.
Other elections that can be exercised in the subsequent tax returns:
• Small business relief election: Certain individuals and small businesses with revenues under Dh3 million may opt for small business relief, essentially being considered as not having taxable income for that applicable tax period.
• Foreign permanent establishment (PE) exemption: UAE-based businesses with foreign PEs may opt to exclude income from these PEs in their corporate tax filings, provided the PE is taxed at a minimum of 9 per cent in its home country along with other conditions.
Consulting an experienced tax agent ensures that your tax strategy is well-informed and aligned with long-term goals.