UAE Corporate Tax loss relief allows taxable persons to offset Tax Losses against future Taxable Income under Articles 37 to 39 of Federal Decree-Law No. 47 of 2022, subject to a 75% deductibility cap per Tax Period. Tax Losses can also be transferred between members of a UAE Tax Group or between entities under common ownership, subject to specific conditions. Abdelhamid & Co. (FTA TAAN 20033908, MOE LC0106-01) assists businesses in Dubai, Sharjah, and across the UAE in structuring and claiming Tax Loss relief correctly.
What Is a UAE Tax Loss?
A Tax Loss arises when a Taxable Person's Taxable Income for a Tax Period is negative — that is, allowable deductions and adjustments exceed the Business's taxable revenues for that period. Tax Losses represent a potential future tax benefit: they can be carried forward and deducted against future positive Taxable Income, effectively reducing the Corporate Tax Payable in future periods.
For businesses in Dubai, Sharjah, Abu Dhabi, or other UAE emirates that are in early-stage operations, heavily investing in capital assets, or experiencing temporary trading difficulties, Tax Loss carry-forward is a significant planning tool.
UAE Tax Loss Carry-Forward — Key Rules
| Rule | Detail |
|---|---|
| Carry-forward period | Indefinite — no expiry on UAE Tax Losses |
| Annual deductibility cap | 75% of Taxable Income in any Tax Period |
| Minimum tax floor | 25% of Taxable Income always taxable when losses are used |
| No carry-back | Tax Losses cannot be carried back to prior Tax Periods |
| Transfer conditions | Common ownership ≥75%; same Financial Year end |
Worked Example — Tax Loss Carry-Forward in Dubai
A Dubai-based technology startup has the following Taxable Income / (Loss) history:
| Tax Period | Taxable Income / (Loss) AED | Tax Loss Used AED | CT Payable AED |
|---|---|---|---|
| FY2024 | (2,000,000) | N/A | Nil |
| FY2025 | 3,000,000 | 2,250,000 (75% of 3M) | 9% × 750,000 = 67,500 |
| FY2026 | 4,000,000 | Nil (all losses used) | 9% × (4M – 375K) = 326,250 |
In FY2025, only 75% of the AED 3 million Taxable Income can be sheltered by the brought-forward loss. This means AED 750,000 remains taxable, ensuring the business pays some Corporate Tax even when using losses.
Restrictions on UAE Tax Loss Carry-Forward
Not all Tax Losses can be freely carried forward. Key restrictions include:
- Business continuity requirement: If a company undergoes a significant change in ownership and business activities cease, the ability to carry forward losses may be restricted.
- Exempt income linkage: Tax Losses arising from activities that generate Exempt Income (e.g., qualifying free zone activities, participation-exempt shareholdings) may not be carried forward against general taxable income.
- Group membership changes: If a company leaves a UAE Tax Group and has historical losses, those losses generally remain with the Tax Group rather than transferring with the departing company.
Transfer of Tax Losses Between UAE Companies
Under Article 38 of the Corporate Tax Law, a company with Tax Losses may transfer those losses to another UAE company under common ownership, subject to conditions:
- Both companies must be UAE Resident Persons subject to the standard 9% Corporate Tax rate
- At least 75% common ownership must exist at the time of transfer and throughout the relevant Tax Period
- Both companies must have the same Financial Year end
- The receiving company cannot use transferred losses to reduce its Taxable Income below zero in that period
This provision is particularly useful for UAE business groups with operating companies in Sharjah, Dubai, and Abu Dhabi where one entity is profitable and another has carry-forward losses.
Tax Loss Relief — Free Zone Entities
Free Zone Persons that are Qualifying Free Zone Persons (QFZPs) and subject to 0% Corporate Tax on Qualifying Income cannot use Tax Losses from their qualifying activities against their taxable non-qualifying income. The losses must be tracked separately based on the nature of the activity that generated them.
Frequently Asked Questions — UAE Tax Loss Relief
How many years can UAE Corporate Tax losses be carried forward?
UAE Tax Losses can be carried forward indefinitely — there is no time limit on their use. However, only 75% of Taxable Income in any Tax Period can be sheltered by carried-forward losses.
What is the 75% cap on UAE Corporate Tax loss deductions?
In any given Tax Period, a maximum of 75% of the Taxable Income can be offset by brought-forward Tax Losses. The remaining 25% minimum remains taxable, ensuring some Corporate Tax is always paid when profits arise.
Can a profitable Dubai company absorb the losses of its Sharjah subsidiary?
Yes, under Article 38, Tax Losses can be transferred between companies with at least 75% common ownership, provided both are UAE Resident Persons subject to the 9% rate and have the same Financial Year end.
Can UAE Tax Losses be carried back to prior Tax Periods?
No. The Corporate Tax Law does not permit carry-back of Tax Losses. Only carry-forward is available.
Are Tax Losses from Free Zone qualifying activities transferable in the UAE?
Generally no. Losses from qualifying Free Zone activities subject to the 0% rate cannot be transferred to offset taxable income at the 9% rate — they remain ring-fenced.
Related Services
See our Corporate Tax services, including CT Compliance Review, CT Return Filing, and Free Zone CT Eligibility. Visit the Federal Tax Authority for official guidance.
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