Step-by-Step Computation

CT Computation: Step-by-Step

Step 1: Start with Accounting Profit

Net profit (IFRS financial statements): AED 2,000,000

Step 2: Add Non-Deductible Expenses

+ Fines:                    20,000
+ Entertainment (50%):      30,000
+ Donations (non-qualifying): 10,000
+ Corporate tax expense:   150,000
+ Non-recoverable VAT:      5,000

Step 3: Subtract Exempt Income

- Dividends (participation): (100,000)
- Capital gains (qualifying):  (50,000)

Step 4: Adjust for Tax-Specific Items

- Tax losses utilised:      (200,000)

Step 5: Calculate Taxable Income

Accounting profit:     AED 2,000,000
+ Add-backs:              AED 215,000
- Exempt income:         (AED 150,000)
- Losses utilised:       (AED 200,000)
= Taxable income:        AED 1,865,000

Step 6: Apply Tax Rates

First AED 375,000 @ 0%:   AED 0
Remaining @ 9%:           AED 134,100
= Corporate Tax payable:  AED 134,100