Is a banking business taxed differently under Corporate Tax?

Article 27 – Business Restructuring Relief 1. No gain or loss needs to be taken into account in determining Taxable Income in any of the following circumstances: a. A Taxable Person transfers its entire Business or an independent part of its Business to another Person who is a Taxable Person or will become a Taxable Person as a result of the transfer in exchange for shares or other ownership interests of the Taxable Person that is the transferee. b. One or more Taxable Persons transfer their entire Business to another Person who is a Taxable Person or will become a Taxable Person as a result of the transfer in exchange for shares or other ownership interests of the Taxable Person that is the transferee, and the Taxable Person or Taxable Persons that are the transferor cease to exist as a result of the transfer. 2. Clause 1 of this Article applies where all of the following conditions are met: a. The transfer is undertaken in accordance with, and meets all the conditions imposed by, the applicable legislation of the State. b. The Taxable Persons are Resident Persons, or Non-Resident Persons that have a Permanent Establishment in the State. c. None of the Persons are an Exempt Person. d. None of the Persons are a Qualifying Free Zone Person. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 34 e. The Financial Year of each of the Taxable Persons ends on the same date. f. The Taxable Persons prepare their financial statements using the same accounting standards. g. The transfer under Clause 1 of this Article is undertaken for valid commercial or other non-fiscal reasons which reflect economic reality. 3. For the purposes of this Decree-Law, where a Taxable Person applies Clause 1 of this Article, all of the following must be observed: a. The assets and liabilities transferred shall be treated as being transferred at their net book value at the time of transfer so that neither a gain nor a loss arises. b. The value of the shares or ownership interests received under paragraph (a) of Clause 1 of this Article shall not exceed the net book value of the assets transferred and liabilities assumed, less the value of any other form of consideration received. c. The value of the shares or ownership interests received under paragraph (b) of Clause 1 of this Article shall not exceed the book value of the shares or ownership interests surrendered, less the value of any other form of consideration received. d. Any unutilised Tax Losses incurred by the Taxable Person that is the transferor prior to the Tax Period in which the transfer under Clause 1 of this Article completes may become carried forward Tax Losses of the Taxable Person that is the transferee, subject to conditions to be prescribed by the Minister. 4. The provisions of this Article shall apply, as the context requires, where, in the case of a transfer under Clause 1 of this Article: a. shares or ownership interests are received by a Person other than the Taxable Person that is the transferor; b. shares or ownership interests are issued or granted by a Person other than the Taxable Person that is the transferee; or c. no shares or ownership interests are received by the Taxable Person who is a partner in an Unincorporated Partnership that is treated as a Taxable Person under Clause 9 of Article 16 of this Decree-Law. 5. Where a Taxable Person transfers an independent part of its Business, paragraph (d) of Clause 3 of this Article shall apply only to those unutilised Tax Losses that Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 35 can be reasonably attributed to the independent part of the Business being transferred. 6. The provision of Clause 1 of this Article shall not apply where, within (2) two years from the date of the transfer, any of the following occurs: a. The shares or other ownership interests in the Taxable Person that is the transferor or the transferee are sold, transferred or otherwise disposed of, in whole or part, to a Person that is not a member of the Qualifying Group to which the relevant Taxable Persons belong. b. There is a subsequent transfer or disposal of the Business or the independent part of the Businesses transferred under Clause 1 of this Article. 7. Where Clause 6 of this Article applies, the transfer of the Business or the independent part of the Business shall be treated as having taken place at Market Value at the date of the transfer. Chapter Nine – Deductions

Article 30 – General Interest Deduction Limitation Rule 1. A Taxable Person’s Net Interest Expenditure shall be deductible up to 30% (thirty percent) of the Taxable Person’s accounting earnings before the deduction of interest, tax, depreciation and amortisation (EBITDA) for the relevant Tax Period, excluding any Exempt Income under Article 22 of this Decree-Law. 2. A Taxable Person’s Net Interest Expenditure for a Tax Period is the amount by which the Interest expenditure incurred during the Tax Period, including the amount of any Net Interest Expenditure carried forward under Clause 4 of this Article, exceeds the taxable Interest income derived during that same period. 3. The limitation under Clause 1 of this Article shall not apply where the Net Interest Expenditure of the Taxable Person for the relevant Tax Period does not exceed an amount specified by the Minister. 4. The amount of Net Interest Expenditure disallowed under Clause 1 of this Article may be carried forward and deducted in the subsequent (10) ten Tax Periods in the order in which the amount was incurred, subject to Clauses 1 and 2 of this Article. 5. Interest expenditure disallowed under any other provision of this Decree-Law shall be excluded from the calculation of Net Interest Expenditure under Clause 2 of this Article. 6. Clauses 1 to 5 of this Article shall not apply to the following Persons: a. A Bank. b. An Insurance Provider. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 37 c. A natural person undertaking a Business or Business Activity in the State. d. Any other Person as may be determined by the Minister. 7. The Minister may issue a decision to specify the application of Clauses 1 and 2 of this Article to a Taxable Person that is related to one or more Persons through ownership or control and there is an obligation on them under applicable accounting standards for their financial statements to be consolidated.

Article 1 – Definitions Words and expressions in this Decision shall have the same meanings specified in the Federal Decree-Law No. 47 of 2022 referred to above (“Corporate Tax Law”), and the following words and expressions shall have the meanings assigned against each, unless the context otherwise requires: Accounting Standards Islamic Financial Instrument : The accounting standards specified in a decision issued by the Minister for the purposes of the Corporate Tax Law. : A financial instrument which is in compliance with Sharia principles and is economically equivalent to any instrument provided for under Clause (2) of Article (2) of this Decision, or a combination thereof. Ministerial Decision No. 126 of 2023 – As published by Ministry of Finance 1 Qualifying Infrastructure Project Qualifying Infrastructure Project Person General Interest Deduction Limitation Rule : A project that meets the conditions of Article (14) of this Decision. : A Resident Person that meets the conditions of Clause (2) of Article (14) of this Decision. : The limitation provided under Article (30) of the Corporate Tax Law.

8. Exceptions to General Interest Deduction Limitation Rule 8.1. Overview Considering Taxable Persons in different sectors may have different capital needs and risk profiles, the Corporate Tax Law provides an exception to the applicability of the General Interest Deduction Limitation Rule to the following:107 • Banks, • Insurance Providers, or • natural persons undertaking Business or Business Activity in the UAE, • any other Person as may be determined by the Minister (none are currently specified). This exception does not apply to treasury companies, captive insurance companies or other non-regulated financial entities that carry out quasi-banking or insurance activities, or to investment vehicles whether regulated (for example, by Securities and Commodities Authority (SCA), Dubai International Financial Center (DIFC) or Abu Dhabi Global Market (ADGM)) or not. These entities remain subject to the General Interest Deduction Limitation Rule. The General Interest Deduction Limitation Rule also does not apply to historical financial assets and liabilities with terms agreed upon before 9 December 2022 (see Section 8.4) and Qualifying Infrastructure Projects (see Section 8.5). 8.2. Banks and Insurance Providers A Bank is a Person licensed in the UAE as a bank or finance institution or an equivalent licensed activity that allows the taking of deposits and the granting of credit as defined in the applicable (non-tax) legislation of the UAE.108 An Insurance Provider is a Person licensed in the UAE that accepts risks by entering into or carrying out contracts of insurance, in both the life and non-life sectors, including contracts of reinsurance and captive insurance, as defined in the applicable (non-tax) legislation of the UAE.109 Banks and Insurance Providers will typically be in a net Interest income position, which is why they are not subject to the General Interest Deduction Limitation Rule,110 but 107 Article 30(6) of the Corporate Tax Law. 108 Article 1 of the Corporate Tax Law. 109 Article 1 of the Corporate Tax Law. 110 Article 30(6) of the Corporate Tax Law. Corporate Tax Guide | Interest Deduction Limitation Rules | CTGIDL1 60