UAE Corporate Tax on Insurance Business

Key Tax provisions

Focus points

Impact area

Specific CT rules for the treatment of unrealized gains/losses to determine the taxable income.

Unrealized gains/losses on capital items excluded for CT purposes.

Unrealized gains or losses

• Revalued investments, assets and reserves created or reversed for accounting purposes.

Dividends and capital gains exempt subject to qualifying shareholdings.

Investment income

• Dividend income earned from a foreign company.

• Capital gains on the disposal of shares of UAE and foreign companies.

Elect to claim tax exemption or tax credit on income of foreign branches.

Election is irrevocable.

Foreign branch

• Computation of tax cost under both of the methods.

• Computation of the foreign tax credit as per the CT rules and the tax treaty provisions.

Interest expense deduction is limited to 30% of EBITDA.

EBITDA rule not to apply for insurance business.

Valid commercial reason and arm’s length for related party borrowings.

Interest expense deduction

• Interest paid on related party borrowings.

Foreign company with:

• Fixed place of business in the UAE.

• Dependent agent in the UAE.

Permanent Establishment (“PE”) Risk

Foreign companies or branches of foreign companies that have:

• Insurance income from UAE customers.

• Business activities in the UAE.

• Person acting on their behalf.

• Person negotiating/concluding their contracts in the UAE.