When a company compiles its financial statements on an accrual basis, it may choose to apply one of the following approaches to how unrealized profits and losses are treated under UAE corporate tax:

Option 1:

The Taxable Person may choose to recognize gains and losses for UAE Corporate Tax purposes on a “realization basis” for all assets and liabilities that are subject to fair value or impairment accounting, meaning that all unrealized gains would not be subject to taxation (and all unrealized losses would not be deductible) until they are actually realized;

Option 2:

The Taxable Person may choose to recognize gains and losses for UAE Corporate Tax purposes on a “realization basis” for all assets and liabilities held on capital account only (i.e., not anticipated to be sold or traded with during routine business operations). Under this option, only unrealized gains and losses in respect of all assets and liabilities held on the capital account would be exempt from taxation or deduction until they are realized. On the other hand, unrealized profits and losses from assets and liabilities maintained in the revenue account would still be included in Taxable Income on a current basis.