UAE CT is computed on accounting profit under IFRS (or IFRS for SMEs), adjusted for CT-specific items. Key adjustments: unrealised gains/losses can be elected out; provisions are only deductible when they crystallise; depreciation follows IFRS rates (no separate CT depreciation schedule). Entities with revenue > AED 50M must submit audited financial statements with the CT return.
Which accounting standard applies?
UAE CT requires that taxable income be computed on the basis of financial statements prepared under IFRS (International Financial Reporting Standards) or IFRS for SMEs (for smaller entities). UAE GAAP does not exist as a standalone standard — IFRS is the default.
Businesses that have historically kept accounts under other standards (local accounting practices, Indian GAAP, US GAAP) must reconcile their accounts to IFRS before computing CT. For most UAE SMEs that were already preparing IFRS-based accounts for bank lending purposes, this is not a new obligation.
Full IFRS has 200+ pages of standards. IFRS for SMEs is a simplified version designed for private companies — it has fewer recognition and measurement options, simpler disclosure requirements, and is accepted by FTA for CT purposes. Most UAE SMEs can use IFRS for SMEs rather than full IFRS.
Key IFRS-to-CT adjustments
| IFRS item | CT treatment | Notes |
|---|---|---|
| Unrealised gains (e.g., investment revaluation) | Eligible for realisation basis election | CT can exclude until gain is realised in cash |
| Unrealised losses | Also deferred under realisation basis election | Consistent with gains — cannot cherry-pick |
| Provisions (e.g., bad debt, warranty) | Not deductible until provision crystallises | Add back in CT computation; deduct when paid/written off |
| IFRS 16 lease right-of-use assets | Depreciation deductible; lease liability interest subject to cap | No specific CT override — IFRS treatment followed |
| IFRS 9 expected credit loss provisions | Not deductible until the debt is formally written off | Add back expected credit loss; CT deduction on actual write-off |
| IFRS 15 revenue recognition | CT follows IFRS recognition — no separate timing rule | Revenue recognised at performance obligation satisfaction |
| Depreciation | IFRS depreciation rates used — no separate CT depreciation schedule | Useful life estimates drive CT deduction |
The realisation basis election — a key CT planning tool
By default, UAE CT follows IFRS — meaning unrealised gains (e.g., mark-to-market increases in investment portfolios, revaluation of financial instruments) are taxable when recognised in the profit and loss account, even though no cash has been received.
A UAE taxable person can elect the realisation basis — deferring recognition of unrealised gains and losses to the period when they are actually realised (converted to cash). This election is particularly valuable for businesses with significant investment portfolios or assets carried at fair value. The election must be made on the CT 300 return.
If you elect the realisation basis, you cannot include unrealised losses as deductions either. It is all-or-nothing for unrealised items. A business with unrealised losses in a particular year may prefer the accrual basis to deduct those losses currently — but then must also include unrealised gains. Model both scenarios before electing.
Financial statement requirements for CT
- Audited financial statements: Mandatory for entities with revenue > AED 50 million per year. Also required for all QFZPs regardless of revenue.
- Reviewed financial statements: Acceptable for entities with revenue ≤ AED 50 million. An ICAEW or ACCA member firm review (not audit) suffices.
- Management accounts: Only acceptable for businesses electing SBR or with revenue ≤ AED 3 million (in practice). FTA may still request reviewed statements in an audit.
- Retention period: 5 years from the end of the relevant tax period (10 years for real estate activities).
Need the IFRS-to-CT reconciliation prepared?
We prepare the full CT adjustment schedule, identify realisation basis election candidates, and ensure your financial statements meet CT filing requirements.
Frequently asked questions
What accounting standard does UAE CT use?
IFRS (full IFRS or IFRS for SMEs) is the required standard for UAE CT computation. Businesses using other accounting frameworks must reconcile to IFRS before computing taxable income.
Are unrealised gains taxable under UAE CT?
By default, yes — IFRS recognises them in P&L, and CT follows. But a realisation basis election defers taxation until the gain is actually converted to cash (realised). The election must be made on the CT 300 return and applies consistently to both unrealised gains and losses.
Are provisions deductible for UAE CT?
No — not when first raised in the accounts. Provisions (bad debts, warranties, litigation) are deducted for CT only when they crystallise — when the actual loss is confirmed and written off or paid. Add back provisions in the CT computation and deduct when settled.
Does UAE CT have its own depreciation schedule?
No. UAE CT uses IFRS depreciation rates directly. There is no separate CT depreciation schedule like MACRS (US) or capital allowances (UK). The IFRS useful life estimate drives the CT deduction.
Do I need audited financial statements for UAE CT?
Entities with revenue > AED 50 million must submit audited financial statements with the CT 300. All QFZPs must also have audited accounts. Below AED 50 million, reviewed statements are acceptable.
What is the realisation basis election in UAE CT?
An optional election that defers taxation of unrealised gains and losses to the period of actual realisation (cash receipt or payment). Useful for businesses with investment portfolios, financial instruments, or assets carried at fair value under IFRS.