UAE Corporate Tax Loss Relief — Carry Forward, Tax Groups & Offset Rules
Under Federal Decree-Law No. 47 of 2022, UAE businesses can carry forward tax losses to offset taxable income in future periods, subject to specific rules on quantum, continuity of ownership, and change of activity. Understanding how loss relief interacts with Tax Group structures, the 75% offset cap, and transitional provisions is critical for effective Corporate Tax planning. Abdelhamid & Co. Certified Public Accountants & Auditors LLC SP — UAE Ministry of Economy Licence LC0106-01, FTA Tax Agent TAN: 30003958 — helps UAE businesses maximise lawful loss utilisation and structure their affairs for long-term CT efficiency.
Key Facts — UAE Tax Loss Relief
- Carry forward: Unlimited periods — no time limit on loss carry-forward
- Carry back: Not permitted under the UAE Corporate Tax Law
- Annual offset cap: 75% of taxable income in any single tax period
- Minimum taxable income: 25% of taxable income always remains chargeable in a profitable period
- Ownership continuity: 50% ownership change may restrict loss use
- Tax Group losses: Transferred and offset within the group under Article 42
How Tax Loss Carry-Forward Works
A tax loss arises when a taxable person's deductible expenditure exceeds its taxable revenue in a given tax period. Under Article 37 of the Corporate Tax Law, that loss can be carried forward indefinitely to reduce taxable income in future profitable periods. There is no five-year or seven-year cap — losses do not expire.
However, in any single tax period, the maximum offset is 75% of that period's taxable income. The remaining 25% is always taxable, ensuring a minimum CT liability in every profitable year. The unutilised portion of the loss carries forward to the next period.
The 75% Offset Cap — Illustrated
Suppose a company has AED 10,000,000 of accumulated tax losses and earns AED 4,000,000 taxable income in Year 2. It may offset up to AED 3,000,000 (75% of AED 4,000,000) in that year, leaving AED 1,000,000 taxable (subject to 9% CT = AED 90,000). The remaining AED 7,000,000 of losses carries forward to Year 3. This prevents complete elimination of CT liability in any given period while still providing meaningful relief for loss-making businesses recovering to profitability.
Ownership Continuity Restriction
Under Article 38, a tax loss may not be carried forward if there has been a change in ownership of 50% or more in the taxable person AND there is a significant change in the nature or conduct of the business. Both conditions must be met simultaneously for the restriction to apply. A change in ownership alone — without a change in business activity — does not automatically restrict loss carry-forward. This rule prevents the acquisition of loss-making shell companies purely to obtain CT relief.
Pre-CT Losses — Transitional Rules
Losses incurred in financial years before the Corporate Tax Law became effective are not recognised as tax losses under the CT regime. A company cannot carry forward accounting losses from pre-CT periods to offset against CT-era taxable income. CT losses begin to accumulate only from the first tax period to which the law applies — for most companies with a 31 December year end, this is the year ending 31 December 2023.
Tax Group Loss Relief
Where a Tax Group has been formed under Article 40 (parent owning ≥95% of UAE-resident subsidiaries), tax losses of one group member can be transferred to and offset against the taxable income of another group member in the same period under Article 42. The group files a single consolidated return, and intra-group loss relief is applied within that consolidated computation. This is particularly powerful for UAE holding structures with a mix of profitable and loss-making subsidiaries.
Transfer of Tax Losses Between Group Members (Non-Tax Group)
Where a formal Tax Group has not been formed, an entity may still surrender tax losses to a related UAE-resident taxable person under Article 38, subject to conditions: the surrendering entity must own at least 75% of the receiving entity (or vice versa), both must have the same financial year end, and both must use the same accounting standards. The surrender reduces the surrendering entity's loss balance and creates an equivalent relief in the receiving entity.
How Abdelhamid & Co. Assists with Loss Planning
- Tax loss position quantification and carry-forward schedule preparation
- 75% offset modelling across multi-year projections
- Ownership continuity analysis before corporate restructuring
- Tax Group formation feasibility for loss-pooling efficiency
- Intra-group loss transfer eligibility assessment
- Annual Corporate Tax return preparation reflecting loss utilisation
Frequently Asked Questions
How long can a UAE company carry forward a tax loss?
Indefinitely. The UAE Corporate Tax Law imposes no time limit on tax loss carry-forward. A loss incurred in the first CT period can be carried forward and used in any future profitable period, subject to the 75% annual offset cap and the ownership continuity rules.
Can a UAE company carry a tax loss back to a prior year?
No. The UAE Corporate Tax Law does not permit loss carry-back. Losses can only be carried forward to offset taxable income in future periods. There is no mechanism to amend a prior year's return to claim a refund based on a subsequent year's loss.
What is the 75% cap on tax loss offset?
In any tax period, a taxable person may offset accumulated tax losses against a maximum of 75% of that period's taxable income. The remaining 25% is always chargeable to Corporate Tax at 9%. This ensures a minimum CT liability in every profitable year while still providing significant relief for previously loss-making businesses.
Can a loss-making UAE subsidiary transfer its losses to a profitable parent?
Yes, subject to conditions. A Tax Group can pool losses automatically in its consolidated CT return. Outside a Tax Group, loss surrender between related UAE-resident entities requires at least 75% ownership, the same financial year end, and the same accounting standards. Both entities must be UAE-resident taxable persons subject to Corporate Tax.
Are accounting losses from before June 2023 recognised as CT losses?
No. Only losses arising in tax periods beginning on or after 1 June 2023 are recognised as tax losses under the Corporate Tax Law. Pre-CT accounting losses cannot be carried forward as CT losses, regardless of their size.
Does a change of shareholders affect a company's ability to use its tax losses?
A change in ownership of 50% or more restricts loss carry-forward only if accompanied by a significant change in the nature or conduct of the business. A pure ownership change — for example a private equity buyout that continues the same business — does not automatically forfeit accumulated tax losses.
Last reviewed: May 2026