UAE Corporate Tax requires taxable persons to include unrealised gains and losses in Taxable Income unless the irrevocable realisation basis election is made under Article 20(3) of Federal Decree-Law No. 47 of 2022 and Article 8 of Ministerial Decision No. 134 of 2023. This election must be made in the first Tax Period and defers gains and losses until actual realisation. Abdelhamid & Co. (FTA TAAN 20033908, MOE LC0106-01) advises businesses across Dubai, Sharjah, and the UAE on the optimal accounting basis elections for Corporate Tax.
What Are Unrealised Gains and Losses for UAE Corporate Tax?
Assets and liabilities held by a business often change in value between accounting periods without any actual sale or settlement. These value changes — recognised in Financial Statements under IFRS fair value or impairment accounting — are known as unrealised gains or losses. Common examples for UAE businesses:
- Fair value movements on investment properties (Dubai and Sharjah real estate companies)
- Foreign currency translation gains/losses on foreign currency loans or receivables
- Mark-to-market adjustments on financial instruments at fair value through P&L
- Impairment charges on goodwill or intangible assets
Under UAE Corporate Tax default rules, both realised and unrealised gains/losses must be included in Taxable Income. This means a company could owe Corporate Tax on paper gains not yet converted to cash — a major cash flow concern for asset-heavy businesses in Dubai and Sharjah.
The Realisation Basis Election — Two Forms
| Form | Scope |
|---|---|
| All assets and liabilities election | All assets/liabilities subject to fair value or impairment accounting under IFRS — unrealised changes excluded until realisation |
| Capital account election | Only assets held on capital account (not trading assets) — narrower scope |
| Rule | Detail |
|---|---|
| When to elect | First Tax Period only — cannot be deferred |
| Irrevocability | Irrevocable except under exceptional circumstances with FTA approval |
| Default (no election) | Not electing in the first Tax Period is itself treated as an irrevocable decision to include all unrealised items |
Worked Example — Dubai Real Estate Company with Investment Properties
A Dubai real estate company holds commercial properties at fair value under IAS 40. In FY2024, properties increase by AED 8 million (unrealised fair value gain in P&L).
Without realisation basis election (default):
| Item | AED |
|---|---|
| Accounting Income (incl. AED 8M fair value gain) | 10,000,000 |
| No adjustment for unrealised gain | — |
| Taxable Income | 10,000,000 |
| Corporate Tax Payable (9% above AED 375K) | 875,250 |
With realisation basis election:
| Item | AED |
|---|---|
| Accounting Income (incl. AED 8M fair value gain) | 10,000,000 |
| Less: Unrealised fair value gain (deferred until disposal) | (8,000,000) |
| Taxable Income | 2,000,000 |
| Corporate Tax Payable (9% above AED 375K) | 146,250 |
The election saves AED 729,000 in Corporate Tax in 2024, deferring it until the property is sold. For capital-intensive businesses in Dubai and Sharjah with large investment property portfolios, this election can have a material impact on annual cash flow.
OCI Items and UAE Corporate Tax
Under IFRS, some gains and losses are reported in Other Comprehensive Income (OCI) rather than the P&L. The UAE Corporate Tax Law requires that OCI items not subsequently recycled to P&L must also be taken into account in determining Taxable Income — a non-obvious requirement that many UAE businesses miss when preparing their first Corporate Tax return.
Frequently Asked Questions — UAE Corporate Tax Unrealised Gains
Do UAE businesses pay Corporate Tax on unrealised fair value gains?
By default, yes. Unless the realisation basis election is made in the first Tax Period, all unrealised gains and losses recognised in Financial Statements must be included in Taxable Income.
When must the realisation basis election be made for UAE Corporate Tax?
In the first Tax Period only — it cannot be deferred. Not electing in the first year is treated as an irrevocable decision to use the default (unrealised gains/losses included).
Can the realisation basis election be reversed for UAE Corporate Tax?
No. The election is irrevocable once made, except under exceptional circumstances with FTA approval. This makes the decision in the first Tax Period critically important.
Does the realisation basis election apply to foreign currency gains and losses in the UAE?
Yes. Unrealised foreign currency translation gains and losses on assets subject to fair value accounting can be deferred under the realisation basis election until the position is settled.
How does the realisation basis election benefit Dubai real estate companies?
For Dubai real estate companies measuring investment properties at fair value under IAS 40, the election defers fair value gains from Taxable Income until the property is actually sold, significantly improving annual Corporate Tax cash flow.
Related Services
Explore our Corporate Tax services, including CT Compliance Review and CT Return Filing. For advisory on accounting elections see our Advisory Services. Official guidance at the Federal Tax Authority.
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