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Chapter 19 Under UAE Corporate Tax – Transitional Rules

Chapter Nineteen – Transitional Rules

Transitional provisions are crucial in any tax regime to ensure a smooth shift from existing practices to adopt the new regulatory framework. These transitional rules guide how businesses prepare their opening balance sheet for tax purposes, align their accounting practices with the corporate tax regulations, and address transitional arrangements for transactions and compliance. These measures help businesses ensure clarity and fairness as they adapt to the corporate tax requirements.

Article 61 – Transitional Rules

A Taxable Person’s opening balance sheet will be the closing balance sheet prepared for financial reporting for corporate tax purposes.

The taxable person must prepare the balance sheet under accounting standards applied in the UAE and should be dated as the last date of the Financial Year that ends immediately before the commencement of their first Tax Period. The minister subject may prescribe any conditions or adjustments to ensure accuracy and consistency with tax obligations.

The opening balance sheet must be prepared based on the arm’s length principle in accordance with Article 34 of this Federal Decree Law to ensure that related-party transactions are valued and recorded as per the market value.

Notwithstanding Article 70 of the Decree-Law, the provisions of Article 50 will apply to transactions or arrangements that entered into on or after the date of publication of the Federal Decree-Law No. 47 of 2022, published in the Official Gazette.

The Cabinet may issue a decision prescribing other transitional measures related to the implementation of this Decree-Law and the application of its provisions, at the suggestion of the Minister.