A UAE company can carry forward tax losses indefinitely and offset up to 75% of each year's taxable income against them, under Article 37 of Federal Decree-Law No. 47 of 2022. Losses from before 1 June 2023 don't count, and a change in ownership above 50% restricts or forfeits the carry-forward unless the business stays the same.
TL;DR
- Tax losses carry forward indefinitely under Article 37 of Federal Decree-Law No. 47 of 2022.
- Each tax period's offset is capped at 75% of that period's taxable income before loss relief — the FTA published this 75% cap in its 2026 Corporate Tax Losses bulletin.
- Losses from before 1 June 2023 are not tax losses and cannot be carried forward.
- A >50% ownership change restricts or forfeits the carry-forward unless the same business activity continues.
Can UAE companies carry forward tax losses under corporate tax?
Yes — losses carry forward indefinitely, and each tax period can offset up to 75% of its taxable income against them. Article 37(2) of Federal Decree-Law No. 47 of 2022 lets a taxable person carry forward tax losses into future tax periods; Article 37(4) caps the offset at 75% of the period's taxable income before relief. The FTA's Corporate Tax Losses bulletin (2026) confirms the 75% cap and the rule that a company must offset losses to the fullest extent possible before any remainder carries forward.
| Loss scenario | Carry-forward treatment in 2026 | Governing rule |
|---|---|---|
| Loss from a pre-CT period (before 1 June 2023) | Not a tax loss; cannot be carried forward | Article 37(3) |
| Loss from an exempt-income activity | Not a tax loss | Article 37(3) |
| Losses carried forward indefinitely | Up to 75% of each period's taxable income can be offset | Article 37(4) |
| Ownership change of more than 50% | Restricted or forfeited unless the same business activity continues | Article 39(1)(a), (1)(b) and (2) |
| Loss transferred between group companies | Allowed if all Article 38 conditions are met; still capped at 75% | Article 38 |
What counts as a tax loss under corporate tax
A tax loss is negative taxable income — when deductible expenses exceed income that is subject to corporate tax in a period. Three categories never qualify:
- Pre-CT losses. Anything incurred before 1 June 2023, or before the person became a taxable person under the law, is not a tax loss.
- Losses from exempt activities. A loss attached to income that is exempt (for example a participation-exempt dividend stream or a foreign permanent establishment with an exemption election) is not a tax loss.
- Small Business Relief periods. Where a company elects SBR, no tax loss arises in that period, and losses carried forward cannot be utilised in an SBR period — though they can still be carried forward or transferred in later, non-SBR periods.
The 75% offset cap, with a worked example
If a company has AED 1,000,000 of taxable income in a tax period and AED 3,000,000 of carried-forward losses, it must offset AED 750,000 — 75% of the AED 1,000,000 — leaving AED 250,000 of taxable income for that period. The balance of AED 2,250,000 carries forward to future periods. The FTA's bulletin is explicit that this is mandatory: a company cannot choose to offset a lower amount to preserve losses for a later year.
The oldest losses are offset first. And the 75% cap applies to the total offset from all sources — a company's own losses plus any transferred-in losses from group companies.
Ownership change: when losses are restricted or forfeited
A change of ownership above 50% — comparing the start of the loss period to the end of the utilisation period — restricts the carry-forward. The loss survives only if the company continues the same or a similar business activity. The FTA bulletin lists three factors for that continuity: same or similar assets in use, no significant change to the core identity or operations, and changes arising from developing what existed before.
The restriction does not apply to a taxable person whose shares are listed on a Recognised Stock Exchange.
Transferring losses between group companies
Article 38 lets one taxable person transfer unused tax losses to another, and the FTA's bulletin lists seven conditions, including both companies being resident, juridical persons, not exempt or Qualifying Free Zone Persons, a financial year end on the same date, the same accounting standards, and a 75% ownership link. The transfer is capped at 75% of the utilising company's taxable income in that period.
What to do before your next tax period
Keep a loss schedule showing the period the loss arose, the amount, and whether any ownership change occurred. If ownership changed more than 50% in any year since the loss arose, document the business-continuity evidence — same assets, same core identity — before claiming the offset. The FTA's bulletin stresses that losses are forfeited when the business changes after a >50% ownership change, so the documentation has to be assembled at the time, not reconstructed for an audit.
FAQ
Can UAE companies carry forward tax losses under corporate tax?
Yes — Article 37(2) of Federal Decree-Law No. 47 of 2022 lets losses carry forward indefinitely, with each period's offset capped at 75% of that period's taxable income before relief.
What is the 75% rule for carried-forward losses in 2026?
A company can offset up to 75% of its taxable income in any tax period against carried-forward losses. The FTA's 2026 Corporate Tax Losses bulletin confirms the cap is mandatory, not optional.
Can losses from before 1 June 2023 be carried forward?
No. Losses incurred before corporate tax took effect are not tax losses under Article 37(3) and cannot be offset against future taxable income.
What happens to tax losses after a change of ownership above 50%?
The carry-forward is restricted and can be forfeited unless the company continues the same or a similar business activity — same assets, same core identity — per Article 39. Listed companies are exempt from this restriction.
Can losses be transferred between companies in a UAE group?
Yes, under Article 38, if both companies are resident juridical persons with a 75% ownership link, the same year end, and the same accounting standards. The offset still can't exceed 75% of the utilising company's taxable income.
How does Small Business Relief affect carried-forward losses?
No tax loss arises in an SBR period, and carried-forward losses cannot be utilised in an SBR period — but they survive and can be used in later non-SBR periods, per the FTA's Corporate Tax Losses bulletin.
