A loss-making year is not wasted for tax purposes. Under UAE Corporate Tax, a loss can be carried forward and set against future profits, reducing the tax you pay in better years. But the relief has conditions and limits, and businesses that assume a loss simply disappears, or that it can wipe out all future tax at once, are both wrong. Here is how tax losses work under the Corporate Tax Law and how to make sure yours are preserved.
Losses carry forward, within limits
Article 37 of Federal Decree-Law No. 47 of 2022 allows a tax loss to be carried forward and used to reduce taxable income in later periods. The key limit is that the offset in any period is capped: a carried-forward loss can reduce no more than 75% of the taxable income of the period it is used in. So a loss can shelter most, but not all, of a future year's profit, and any unused balance carries on to the next period.
| Point | The rule | Source |
|---|---|---|
| Carry forward | Tax losses carry forward to future periods | Art 37 |
| Offset cap | Use up to 75% of a period's taxable income | Art 37 |
| Transfer within a group | Losses can, in conditions, transfer between group companies | Art 38 |
| Continuity test | Carried-forward losses can be lost on major ownership or activity change | Art 39 |
The continuity test protects the relief from abuse
The relief is not unconditional. Article 39 restricts the use of carried-forward losses where there has been a significant change in ownership together with a change in the business or activity. The rule exists to stop loss-making companies being bought purely for their tax losses. For an ordinary business carrying on the same activity, it is not a problem, but a business going through a major ownership change should check whether its losses survive it.
A loss is a stored asset, but a conditional one. Carry it forward, use up to 75% of a future year's income against it, and protect it through major ownership changes, or it can be lost.
Losses within a group
Where companies are part of the same group and meet the conditions, Article 38 allows tax losses to be transferred between them, so a loss in one company can reduce the taxable income of another. This is useful for groups with a mix of profitable and loss-making entities, but it depends on the ownership and other conditions being met. It is one reason group structure and Corporate Tax planning are worth looking at together.
You still have to file to claim it
A loss only becomes a usable asset if it is reported. A registered taxable person must file its return even in a loss year, and the loss is recorded through that return so it can be carried forward. Skipping the return in a loss year does not just risk a late-filing penalty; it leaves the loss undocumented and harder to rely on later. File the loss to bank it.
What to do about it
Treat a tax loss as an asset to preserve. File your return even in a loss year so the loss is recorded, apply it against future profits within the 75% cap, and watch the continuity test if ownership or activity changes significantly. Where you are part of a group, consider whether losses can be used across companies. A loss handled properly reduces tax for years; one that is never filed or is lost to a technicality helps no one.
This article is general information and is not tax advice. Loss relief depends on your circumstances and the conditions in Federal Decree-Law No. 47 of 2022. We would be glad to help you preserve and use your tax losses.