Introduction – Transitional Rules under UAE Corporate Tax
Transitional Rules provide guidance for transitioning from the existing legal system to the new legal framework. The Transitional Rules set here enlist the provisions that are required to be implemented to transition smoothly from the pre-UAE Corporate Tax Law system to post UAE Corporate Tax Law regime.
Article 61: Transitional Rules under the UAE Corporate Tax Law
The transitional rules under the UAE Corporate Tax Law are as follows:
Opening Balance Sheet for the purposes of the UAE Corporate Tax Law
- The opening balance sheet of a Taxable Person will be the closing balance sheet prepared for the purposes of financial reporting in accordance with the accounting standards.
- ‘Accounting standards’ that are to be followed refer to standards that are applicable in the UAE on the last day of the Financial Year.
- It is to be noted that such Financial Year will end immediately before the commencement of the firsTax-Period for the implementation of the Corporate Tax.
Application of Arm’s Length Principle under the UAE Corporate Tax Law
- The opening balance sheet should be in accordance with the arm’s length principle as per Article 34 of the UAE Corporate Tax Law related to transfer pricing rules for transactions between Related Parties or Connected Persons.
Other Transitional Rules under the UAE Corporate Tax Law
- Any other transitional rules for implementing the UAE Corporate Tax Law’s provisions can be prescribed by the Cabinet on the suggestion from the Minister.
Applicability of Anti-Abuse Provisions
- The provisions of Article 50 i.e., the anti-abuse provisions will be applicable on the transactions and arrangements entered on or after the date of publication of the Corporate Tax Law in the Official Gazette.
- This is to ensure the smooth functioning of transition rules for preparing the opening balance of the financial statements and effective application of the arm’s length principle.
