Answer:
Taxable income is the net accounting profit (or loss) of a business for a Tax Period, as shown in its financial statements, adjusted in accordance with the Corporate Tax Law. These adjustments include exempt income, disallowed expenses, reliefs, and other specific modifications. (Article 12 and Article 20 of Federal Decree-Law No. 47 of 2022)
Calculation Method:
Taxable income is generally calculated as follows:
• Start with accounting income based on financial statements prepared in line with accepted UAE accounting standards.
• Adjust for:
- Exempt income (e.g., qualifying dividends or capital gains)
- Allowable and disallowed deductions
- Reliefs (e.g., small business relief, business restructuring)
- Unrealized gains or losses (optional realization basis election)
- Related party and connected person transactions
- Tax loss reliefs and carryforwards
Examples:
• A UAE resident LLC with AED 2,000,000 accounting profit and AED 300,000 in exempt dividend income will have AED 1,700,000 as its taxable income after adjustments.
• A foreign company with a permanent establishment in the UAE earning AED 1,200,00...