Ministerial Decision No. 134 of 2023 · UAE Federal
Sets the adjustments made to accounting income to arrive at taxable income, including the election for accrual-basis taxpayers to recognise gains and losses only on realisation, special rules for banks and insurers, and the treatment of unrealised gains and losses.
Ministerial Decision No. 134 of 2023 lists the adjustments that turn Accounting Income into Taxable Income beyond those written into Article 20(2) of the Corporate Tax Law (Federal Decree-Law No. 47 of 2022). It was issued on 29 May 2023, came into effect the day after publication, and remains in force. The other 2023 relief decisions refer to it as the general taxable income decision.
Article 2 sets the general adjustments. Accounting Income is adjusted to include realised and unrealised gains and losses reported in the Financial Statements that would not later pass through the income statement (for example items in other comprehensive income), and to replace the equity method of accounting with the cost method where the equity method was used. Where the Taxable Person has elected the realisation basis under Article 20(3), the article excludes, until realisation, changes in the value of assets other than Financial Assets to the extent the net book value exceeds original cost, excludes all changes in the value of liabilities and Financial Assets including amortisation, and brings the unrecognised amounts into charge on realisation, other than amounts arising before the most recent non-relieved acquisition.
Article 3 deals with transfers between Related Parties at other than Market Value: where the transferee paid more than Market Value, depreciation on the excess is excluded and the excess is brought in on realisation unless the transferee elects to recognise it as an adjustment; where it paid less and the transferor has taxed the difference, the transferee is relieved correspondingly.
Articles 4 and 5 provide the transferee's adjustments after a Qualifying Group transfer (Article 26) or a Business Restructuring transfer (Article 27): depreciation relating to the transferor's unrecognised gain is excluded and the deferred amount is included on realisation. Article 6 excludes from a partner's Taxable Income amounts already taxed in an Unincorporated Partnership that has elected to be a Taxable Person, and gains on a partnership interest meeting the Article 23(2) conditions.
Article 7 governs deductions: expenditure that fails the conditions of Chapter Nine of the law is not deductible, depreciation or amortisation of capitalised expenditure is disallowed where the expenditure would not have been deductible as revenue expense, and non-deducted capital expenditure is deducted when computing the gain or loss on realisation.
Article 8 sets the realisation-basis election. A Taxable Person preparing accrual-basis Financial Statements may elect to recognise gains and losses only on realisation; Banks and Insurance Providers may do so only for the assets and liabilities in Article 20(3)(b). The decision to elect or not is made in the first Tax Period and is irrevocable save in exceptional circumstances with FTA approval. Article 9 defines realisation to include sale, disposal, settlement and complete worthlessness of an asset, and settlement, assignment or forgiveness of a liability, but not transfers covered by Article 26 or Article 27 relief.
Every Taxable Person computing Taxable Income from Accounting Income under Article 20 of the Corporate Tax Law, with specific rules for persons electing the realisation basis, Banks and Insurance Providers, Related Party transferees, members of Qualifying Groups, parties to Business Restructuring Relief and partners in Unincorporated Partnerships taxed in their own right.
English official text in 10 articles. Open the full text or jump to a provision:
| Article 2(1)–(2) | Accounting Income is adjusted to include realised and unrealised gains and losses reported in the Financial Statements that would not later be recognised in the income statement, and to replace the Equity Method of Accounting with the Cost Method where applied. |
| Article 2(3)–(4) | Where the realisation basis is elected, changes in value of assets (above original cost) and of liabilities and Financial Assets are excluded until realisation, and the unrecognised amounts are brought in on realisation, other than amounts arising before the most recent acquisition outside Article 26 or 27 relief. |
| Article 3 | On transfers between Related Parties above Market Value the transferee excludes depreciation on the excess and brings it in on realisation, unless it elects to recognise the excess as an adjustment; below Market Value, the transferee is relieved where the transferor has taxed the difference. |
| Articles 4–5 | After a Qualifying Group transfer (Article 26) or Business Restructuring transfer (Article 27), the transferee excludes depreciation and value changes relating to the transferor's unrecognised gain and includes the deferred amount on realisation. |
| Article 6 | A partner in an Unincorporated Partnership that has elected to be a Taxable Person excludes income already taxed in the partnership and gains on disposal of a partnership interest meeting the Article 23(2) participation conditions. |
| Article 7 | Expenditure failing the Chapter Nine conditions is not deductible; depreciation of capitalised expenditure that would not have been deductible as revenue expense is disallowed; other non-deducted capital expenditure is deducted on realisation of the asset. |
| Article 8(1)–(2) | A Taxable Person preparing accrual-basis Financial Statements may elect to recognise gains and losses on a realisation basis; Banks and Insurance Providers may elect only for the assets and liabilities in Article 20(3)(b) of the law. |
| Article 8(3) | The decision to elect, or not to elect, the realisation basis is made in the first Tax Period and is irrevocable except in exceptional circumstances with FTA approval. |
| Article 9 | Realisation includes sale, disposal, settlement and complete worthlessness of an asset and settlement, assignment or forgiveness of a liability, but not transfers relieved under Article 26 or Article 27. |
| Article 10 | The decision was published and came into effect the day following publication; it was issued on 29 May 2023. |
Our accountants apply these rules to every client's Corporate Tax computation, and the realisation-basis election is the first decision we take with each new client in its first Tax Period, because it cannot be changed later. For holding companies carrying property, securities or crypto assets at fair value, electing the realisation basis keeps unrealised revaluation gains out of Taxable Income until a sale, which is usually what the owner expects; for a trading company with no revalued assets the election makes little difference and we document the decision either way. The equity-method adjustment in Article 2 matters for clients with associates and joint ventures, where the accounts show a share of profits that the tax computation replaces with dividends actually received. When a client buys an asset from a related party we check the price against Market Value, since Article 3 denies depreciation on any excess.
| Cites | Tax Procedures Law · Corporate Tax Law |
“Cites” and “Cited by” are built automatically from references in the full texts held in this library; they cover only instruments in the library.
Corporate Tax Law
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Unincorporated Partnerships and Family Foundations Decision (2024)
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