What is the general anti-abuse rule in Corporate Tax?

Answered by TI from the Federal Tax Authority’s own law · 15 September 2026. Guidance, not tax advice: rely on the official text.

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The tax authority can step in and undo a transaction that has no real business purpose and is mainly done to get a tax advantage, then recalculate your tax as if it had not happened.

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The detail

The Corporate Tax general anti-abuse rule (GAAR) allows the FTA to counteract or adjust a transaction, arrangement, or any part of it where, on all the circumstances, (a) it was not entered into for a valid commercial or non-fiscal reason that reflects economic reality AND (b) the main purpose or one of the main purposes was to obtain a Corporate Tax advantage inconsistent with the law\\u2019s intention (Article 50(1)). The tax advantage includes refunds, reduction or deferral of tax, and avoiding an obligation to withhold or account for tax (Article 50(2)). Where the rule applies, the FTA issues an assessment that may disallow exemptions or deductions, reallocate them, recharacterise payments, or disregard the effect of the tax provisions, and may make compensating adjustments to other persons (Articles 50(3)-(4)).1

What the law says

Article 50(1) of the Corporate Tax Law provides that the GAAR applies only if the transaction lacks a valid commercial or non-fiscal reason reflecting economic reality AND the main purpose, or one of the main purposes, is a Corporate Tax advantage.1
Article 50(2) defines a Corporate Tax advantage to include a refund or increased refund, avoidance or reduction of tax payable, deferral of payment or advancement of refund, and avoiding an obligation to deduct or account for tax (Articles 50(2)(a)-(d)).1
Article 50(6) requires the FTA, in any proceeding on the application of the GAAR, to demonstrate that its determination is just and reasonable (Articles 50(6)).1

What it depends on

The rule requires BOTH conditions to be met: no valid commercial or non-fiscal reason reflecting economic reality AND a main purpose of obtaining a Corporate Tax advantage (Article 50(1)).1
In deciding whether the rule applies, the FTA considers how the transaction was carried out, its form and substance, timing, results, and whether rights or obligations depart from those that would exist at arm\\u2019s length (Article 50(5)).1

Sources (1) — read the official text

1Corporate Tax LawArticle 50Law

Article 50 – General Anti-abuse Rule

Read the article
Article 50 – General Anti-abuse Rule 1. This Article applies to a transaction or an arrangement if, having regard to all relevant circumstances, it can be reasonably concluded that: a. the entering into or carrying out of the transaction or arrangement, or any part of it, is not for a valid commercial or other non-fiscal reason which reflects economic reality; and b. the main purpose or one of the main purposes of the transaction or arrangement, or any part of it, is to obtain a Corporate Tax advantage that is not consistent with the intention or purpose of this Decree-Law. 2. For the purposes of this Article, a Corporate Tax advantage includes, but is not limited to the following: a. A refund or an increased refund of Corporate Tax. b. Avoidance or reduction of Corporate Tax Payable. c. Deferral of a payment of Corporate Tax or advancement of a refund of Corporate Tax. d. Avoidance of an obligation to deduct or account for Corporate Tax. 3. Where the provisions of this Article apply to a transaction or arrangement, the Authority may make a determination that one or more specified Corporate Tax advantages obtained as a result of the transaction or arrangement are to be counteracted or adjusted. 4. If a determination is made under Clause 3 of this Article, the Authority must issue an assessment giving effect to the determination, which may include: a. allowing or disallowing any exemption, deduction or relief in calculating the Taxable Income or the Corporate Tax Payable, or any part thereof; b. allocating any such exemption, deduction or relief, or any part thereof, to any other Persons; c. recharacterising for the purposes of this Decree-Law the nature of any payment or other amount, or any part thereof; or d. disregarding the effect that would otherwise result from the application of other provisions of this Decree-Law, Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 53 and can make compensating adjustments to the Corporate Tax liability of any other Person affected by the determination made by the Authority. 5. For the purpose of determining whether this Article applies to a transaction or arrangement, the following must be considered: a. The manner in which the transaction or arrangement was entered into or carried out. b. The form and substance of the transaction or arrangement. c. The timing of the transaction or arrangement. d. The result of the transaction or arrangement in relation to the application of this Decree-Law. e. Any change in the financial position of the Taxable Person that has resulted, will result, or may reasonably be expected to result, from the transaction or arrangement. f. Any change in the financial position of another Person that has resulted, will result, or may reasonably be expected to result, from the transaction or arrangement. g. Whether the transaction or arrangement has created rights or obligations which would not normally be created between Persons dealing with each other at arm’s length in respect of the relevant transaction or arrangement. h. Any other relevant information and circumstances. 6. In any proceeding concerning the application of this Article, the Authority must demonstrate that the determination made under Clause 3 of this Article is just and reasonable. Chapter Sixteen – Tax Registration and Deregistration

Official PDF, pp. 53–54Captured from the FTA website on 9 Sep 2026Found by following a reference in another source

Helpful?

The tax authority can step in and undo a transaction that has no real business purpose and is mainly done to get a tax advantage, then recalculate your tax as if it had not happened.

What the law says:
- Article 50(1) of the Corporate Tax Law provides that the GAAR applies only if the transaction lacks a valid commercial or non-fiscal reason reflecting economic reality AND the main purpose, or one of the main purposes, is a Corporate Tax advantage. [1]
- Article 50(2) defines a Corporate Tax advantage to include a refund or increased refund, avoidance or reduction of tax payable, deferral of payment or advancement of refund, and avoiding an obligation to deduct or account for tax (Articles 50(2)(a)-(d)). [1]
- Article 50(6) requires the FTA, in any proceeding on the application of the GAAR, to demonstrate that its determination is just and reasonable (Articles 50(6)). [1]

What it depends on:
- The rule requires BOTH conditions to be met: no valid commercial or non-fiscal reason reflecting economic reality AND a main purpose of obtaining a Corporate Tax advantage (Article 50(1)). [1]
- In deciding whether the rule applies, the FTA considers how the transaction was carried out, its form and substance, timing, results, and whether rights or obligations depart from those that would exist at arm\\u2019s length (Article 50(5)). [1]

Sources:
1. Corporate Tax Law — Article 50

Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer

What is the general anti-abuse rule in Corporate Tax?

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