First Tax Period of a Legal Entity

On July 30, 2024, the FTA issued a significant clarification on corporate tax, known as CTP003. This clarification focuses on the calculation of the first tax period for legal entities operating in the UAE.

As the Corporate Tax Law lacks specific provisions necessary to determine the first financial year, which is essential for defining the tax period of a legal entity, the FTA has issued guidance to address these uncertainties, including practical examples to aid understanding.

The clarification covers key topics, such as the process for calculating the first tax period for companies incorporated in the UAE, foreign companies managed from the UAE, and companies operating in the UAE through permanent establishments. It also outlines the specifics of tax accounting for companies that cease operations during the first tax period.

This material explains the steps involved in calculating the first financial year and tax period, accompanied by practical examples for clarity.

For more information, please refer to the attached alert.