UAE CT I Application of Corporate Tax on Unrealized Gains and Losses

Under Article 20(3) of the UAE CT law, an option has been given to the taxable person to take into account the gains and losses on a realization basis related to all assets and liabilities that are subject to fair value or impairment accounting under the applicable accounting standards; or all assets and liabilities held on capital account at the end of a tax period. However, the gain or loss on all assets and liabilities held in the revenue account will be considered on an unrealized basis as given in clause 20(3)(b) of the UAE CT law. This means the taxable person can elect for the gain to be taxed or the loss to be allowed on a realization basis only for the assets and liabilities subject to fair value or impairment accounting or held on capital account. Whatever the treatment, it will apply to all assets and liabilities of the respective category.

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In Example 2, why would anyone appreciate a depreciable asset. Consider your example, if WDV is 0.8 and Market value is 0.9, then unrealised gain is 0.1. Now in current year, taxpayer will pay tax on 0.1 (accrual basis). However, this 0.1 will be capitalised back to the asset (since its a capital asset) and from next year onwards, depreciation would be allowed on 0.9.
So basically taxpayer is paying tax on 0.1 in year 0 and taking depreciation on it in future years.
Hence, the concept of appreciation to depreciable asset is absurd.