UAE Corporate Tax: How to Keep, Use and Carry Forward Your Tax Losses

A company loses AED 2 million in one year and makes AED 2 million the next. Instinct says the two cancel out and no tax is due. They do not. Only 75% of the profit can be sheltered, so AED 500,000 still stays taxable. The FTA's Basic Tax Information Bulletin on Corporate Tax Losses, published on 25 June 2026, sets out how Articles 37 to 39 work in question-and-answer form. Several of the answers are tighter than the market has been assuming.

What is a loss, and what only looks like one

A Tax Loss is simply negative Taxable Income: after the Corporate Tax Law's adjustments to accounting profit, deductions exceed income. What matters is what does not qualify. Losses from before 1 June 2023 do not count. Losses from before the person became a Taxable Person do not count. Nor do losses arising from activities that produce exempt income, since the income side would never have been taxed either. A balance sheet showing accumulated losses from 2019 is not the same thing as having tax losses, and the two are regularly confused.

Carry forward: unlimited in time, capped in use and not optional

• No expiry. Losses can be carried forward indefinitely. There is no five-year or ten-year window as in many neighbouring regimes.
• The 75% ceiling. Relief in any period is limited to 75% of that period's Taxable Income, so at least a quarter of every profitable year is taxed regardless of how large the loss pool is.
• Oldest first, and use them fully. The bulletin confirms that losses are absorbed on a first-in, first-out basis, and that a Taxable Person must use them to the fullest extent the 75% cap allows. Holding losses back for a better year is not a choice the Law offers.
• Own losses rank ahead of transferred ones. A company must exhaust its own carried-forward losses before using losses received from another person - and before transferring any of its own out.

The ownership test: losses can disappear on a share sale

This is where value is most often lost. If ownership of the company changes by more than 50% between the start of the period in which a loss arose and the end of the period in which it is used, the losses survive only if the same or a similar business continues. The FTA looks at whether the same assets are still used, whether the core identity and operations are intact, and whether any changes came from developing what was already there. Listed companies are outside the restriction entirely.

Transferring losses without forming a Tax Group

Article 38 allows one UAE company to pass losses to another, which is often simpler than grouping. Seven conditions apply and every one must hold: both parties are juridical persons, so nothing moves to or from an individual; both are Resident Persons, which excludes UAE branches of foreign companies; one owns at least 75% of the other, or a third person owns 75% of each, held continuously from the start of the loss period to the end of the offset period; neither is an Exempt Person; neither is a Qualifying Free Zone Person; both have the same financial year end; and both apply the same accounting standards.

The parties choose how much to move, but the recipient's total relief, its own losses plus anything transferred, still cannot exceed 75% of its Taxable Income.

Small Business Relief: a trade-off that is rarely priced

Electing Small Business Relief treats a Resident Person as having no Taxable Income for the period. It follows that no new loss can arise in that period, and that losses brought forward cannot be used or transferred while the election is in place. They are not destroyed - they wait, and become available again once the election stops but a company sitting on a meaningful loss pool that elects out of habit may be paying more for the administrative convenience than it realises. The comparison is worth running before the election, not after.

Practical Takeaways

Treat losses as an asset on the register rather than a footnote: tracked per entity, per year, with the ownership position recorded alongside. Test the 50% question before any share transfer completes. Do not deregister a company holding losses without checking what goes with it. Remember that free zone entities sit outside the transfer rules altogether. And run the Small Business Relief numbers both ways before electing. None of this is difficult, but almost all of it is easier before a transaction than during a review.

How can we help?

AKM Global can quantify and document loss positions across a group, test whether carry-forward survives a change in shareholding, structure loss transfers between qualifying entities, and model Small Business Relief against the value of the losses it would suspend. We can also review historic returns where the 75% cap or the ordering rules may have been applied incorrectly.