UAE Tax CT Taxable income and the tax computation: practice questions with answers

Question 1

Tamarisk Holdings LLC is a mainland UAE company that owns 100% of two UAE subsidiaries. It prepares IFRS consolidated financial statements for the group and separate financial statements for itself. The companies have not formed a tax group. For its Corporate Tax return, from which figure does Tamarisk start when computing its taxable income?

1. A Net profit for the year in the group's consolidated financial statements
2. B Consolidated profit attributable to the owners of Tamarisk as parent
3. C Tamarisk's cash receipts less cash payments recorded in the tax period
4. D Net profit in Tamarisk's own standalone financial statements, then adjusted

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Answer: D. Under Article 20(1), Corporate Tax Law, the taxable income of each taxable person is determined separately on the basis of its standalone financial statements prepared under accepted accounting standards. Article 20(2) then requires the accounting income to be adjusted (unrealised items, exempt income, reliefs, non-deductible amounts, transfer pricing and so on). Consolidated figures are relevant only where a tax group is formed (Article 40), which is not the case here.

Question 2

Willowbank Foods LLC's accounting net profit for 2025 is AED 1,960,000. This is after charging its AED 340,000 share of the loss of a 40% associate accounted for under the equity method, and after including a dividend of AED 150,000 from a 3% holding in a UAE resident company. There are no other adjustments. Rates: 0% up to AED 375,000 of taxable income, 9% above. What is Willowbank's Corporate Tax payable for 2025?

1. A AED 98,550
2. B AED 129,150
3. C AED 159,750
4. D AED 173,250

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Answer: C. Equity-method results are replaced by the cost method (Ministerial Decision No. 134 of 2023, under Article 20, Corporate Tax Law), so the share of the associate's loss is added back. The UAE dividend is exempt (Article 22).

Taxable income = AED 1,960,000 + AED 340,000 − AED 150,000 = AED 2,150,000

Corporate Tax = (AED 2,150,000 − AED 375,000) × 9% = AED 159,750

Question 3

A director of Cedarline Consulting LLC attended a 6-day professional conference abroad and stayed 4 more days on holiday. Cedarline paid the conference registration fee of AED 14,000 and AED 30,000 for flights and hotel covering the whole 10-day trip. The company apportions shared trip costs by days, which is fair and reasonable here. How much is deductible?

1. A AED 14,000
2. B AED 18,000
3. C AED 26,400
4. D AED 32,000

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Answer: D. For mixed-purpose expenditure, Article 28(3), Corporate Tax Law allows the identifiable business part plus a fair and reasonable proportion of the part that cannot be identified.

- Conference fee (identifiable, wholly business): AED 14,000
- Flights and hotel: AED 30,000 × 6/10 = AED 18,000

Deductible = AED 32,000

Question 4

Thornfield Aggregates LLC prepares accounts to 31 December. Part of its net interest expenditure for the year ended 31 December 2025 is disallowed under the general interest limitation rule. Up to which tax period can that disallowed amount be carried forward and deducted?

1. A The year ending 31 December 2030
2. B The year ending 31 December 2035
3. C The year ending 31 December 2032
4. D Without time limit, as with tax losses

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Answer: B. Under Article 30(4), Corporate Tax Law, net interest expenditure disallowed in a tax period may be carried forward and used in the subsequent 10 tax periods, in the order incurred. For an amount disallowed in 2025, the ten following periods are 2026 to 2035, so it can be used up to the year ending 31 December 2035. (Tax losses, by contrast, have no time limit under Article 37.)

Question 5

Harbourline Contracting LLC's 2025 expenses include: a municipality fine for working without a permit AED 45,000; liquidated damages paid to a client under the contract for late completion AED 260,000; traffic fines on company trucks AED 12,500; and an FTA administrative penalty for late payment of VAT AED 8,000. What amount is non-deductible?

1. A AED 57,500
2. B AED 65,500
3. C AED 260,000
4. D AED 325,500

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Answer: B. Article 33, Corporate Tax Law disallows fines and penalties, other than amounts awarded as compensation for damages or breach of contract.

- Non-deductible: municipality fine AED 45,000 + traffic fines AED 12,500 + FTA penalty AED 8,000 = AED 65,500
- Deductible: liquidated damages under the contract AED 260,000

Question 6

Which statement about the opening balance sheet of a taxable person for its first Corporate Tax period is correct?

1. A All assets are restated to market value at the start of the first tax period
2. B The person may choose any balance sheet date during 2023 that suits it
3. C It is the prior year's closing balance sheet, prepared on an arm's length basis
4. D Only assets acquired on or after 1 June 2023 have any value for tax purposes

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Answer: C. Under Article 61, Corporate Tax Law (and Ministerial Decision No. 120 of 2023), the opening balance sheet is the closing balance sheet prepared under accounting standards for the last financial year ending before the first tax period, and it must reflect the arm's length principle (Article 34) for transactions with related parties and connected persons. Assets are not generally revalued; separate elections deal with certain gains accrued before Corporate Tax.