In simpler terms, before the first corporate tax period kicks in, you need a solid starting point which would be your opening balance sheet. This article zooms in on the important rules you should know about when it comes to corporate tax, especially the ones dealing with how to handle assets acquired before the tax party begins. 

To start with corporate tax in uae requires having an opening balance sheet at the beginning of the corporate tax period, which is the closing balance sheet of the previous period. Imagine it as a book that begins with the last chapter of the previous one in the book series.  If there were no accounts prepared for the previous financial year, a closing balance sheet must be prepared under the appropriate accounting standards, whether cash basis or accrual basis. 

Adjustments are crucial for certain items acquired before becoming subject to corporate tax. These adjustments are related to immovable properties, intangible assets, and financial assets and liabilities owned prior to the first corporate tax period. 

1. For immovable properties, a taxable person can choose to adjust their taxable income when calculating gains on properties meeting specific conditions.  

• First, the property must be owned before the first corporate tax period  

• Secondly, it must be measured on a historical cost basis  

• Thirdly, it may be disposed of or deemed to be disposed of during or after the first corporate tax Period for a value exceeding its net book value to determine taxable income. 

If the above conditions are satisfied, upon the disposal of the Qualifying Immovable Property, the Taxable Person shall make one of the following adjustments in respect of each Qualifying Immovable Property:  

Method 1: Gains to be excluded at the start of first uae corporate tax period = Market value at the start of the tax period – Higher of (Original Cost) or (Net Book Value)  

  Method 2: Gains to be excluded at the start of first uae corporate tax period = Gain on Disposal (Disposal amount – Higher of original cost or net book value)* (no of days the property was held before the first corporate tax Period / Total no of days the property was held 

 2. Similarly, for intangible assets, a taxable person may adjust taxable income for gains on assets meeting certain conditions.  

• The assets must be owned before the first uae corporate tax period 

• It must be measured on a historical cost basis 

• It must be disposed of for a value exceeding the net book value.  

If these conditions are met, the adjustment method mirrors that of immovable properties. 

Gains to be excluded at the start of first uae corporate tax period = Gain on Disposal (Disposal amount – Higher of original cost or net book value) * (no of days the property was held before the first tax Period / Total no of days the property was held )  

The number of days the Qualifying Intangible Asset is owned before the first uae corporate Tax Period shall not exceed a period equivalent to a maximum of ten years, except under exceptional circumstances and pursuant to approval by the Authority. 

This election being made in the first uae corporate tax return and deemed irrevocable, except under exceptional circumstances with approval. 

3. When it comes to financial assets and liabilities owned before the first uae corporate tax period, a taxable person can adjust taxable income for gains and losses.  

These assets or liabilities must be owned before the first uae corporate tax period and measured on a historical cost basis.  

The adjustment involves: 

Gains to be excluded at the start of first tax period = Market value at the start of the tax period – Higher of (Original Cost) or (Net Book Value)  

As with the other adjustments, this election is made in the first uae corporate tax return and is deemed irrevocable, except under exceptional circumstances with approval. 

Making adjustments for properties, intangible stuff, and financial deals from the past is like having a reliable map and a right plan to deal the hassles of corporate tax in uae. Remember, the choices you make early on stick around, so decide wisely. By applying these insights, facing the corporate tax challenge becomes less of a puzzle and more of a strategic play.