Is a gain on revaluation of property taxed under Corporate Tax?

Article 20. 3. For the purposes of Clauses 1 and 2 of this Article, the decision to make an election, or not to make an election, shall be made by the Taxable Person during the first Ministerial Decision No. 134 of 2023 – As published by Ministry of Finance 7 Tax Period and shall be deemed irrevocable, except under exceptional circumstances and pursuant to approval by the Authority.

The decision to make, or not make, an election to apply the realisation basis must be made by the Taxable Person during their first Tax Period, and will be deemed irrevocable except under exceptional circumstances and pursuant to approval by the FTA.134 If the Taxable Person does not make the election to apply the realisation basis in their first Tax Period then this will be considered an irrevocable election in itself. Example 7: Fair value gain on land During the Financial Year ending 31 December 2025, C LLC, a UAE resident company, recognised a revaluation gain in its Financial Statements of AED 10,000,000 in respect of some land which is measured at fair value. The original cost of the land was AED 50,000,000 and following the revaluation the net book value of the land is AED 60,000,000. The land was not sold at the end of the Tax Period and, therefore, the revaluation gain is considered ‘unrealised’. If no election is made, C LLC would be subject to tax on the unrealised gain of AED 10,000,000 in relation to the Tax Period ending on 31 December 2025. However, if C LLC elects to apply the realisation basis in respect of all assets and liabilities that are subject to fair value or impairment accounting, then the company would not have to include the revaluation gain of AED 10,000,000 when calculating their Taxable Income for this Tax Period. Example 8: Loss below original cost During the Financial Year ending 31 December 2025, S LLC, a UAE resident company, recognised a revaluation loss in its Financial Statements in respect of an asset measured at fair value. The original cost of the asset was AED 250,000, and following the revaluation the net book value of the asset is AED 200,000. The asset has not been sold at the end of the Tax Period. The revaluation loss of AED 50,000 is considered ‘unrealised’. Exempt Income Several exemptions are provided for within the Corporate Tax regime.135 The purpose of these exemptions is to either: • exempt income and capital gains arising from the activity of another juridical person or a foreign branch on the basis that it has already been taxed; or 134 Article 8(3) of Ministerial Decision No. 134 of 2023. 135 Articles 22 to 25 of the Corporate Tax Law. General Corporate Tax Guide | Corporate Tax | CTGGCT1 52