Corporate Tax

Using Tax Losses Under UAE Corporate Tax

2025-12-08 · 4 min read · By Aureus Worldwide

Few businesses are profitable in every period, and UAE corporate tax recognises this: losses made in one period can, within limits, reduce tax in profitable ones. But the relief is not automatic or unlimited. Federal Decree-Law No. 47 sets out who can use losses, how much can be offset, and the continuity conditions that must hold. Used well, loss relief is a legitimate and valuable part of managing your tax cost. Used carelessly, a loss you assumed was available can be denied. This guide explains how UAE tax losses work and what to document.

What a tax loss is

A tax loss arises when your deductible expenses and reliefs exceed your taxable income for a period, in other words, a negative taxable income after the usual adjustments. It is a tax concept, not simply an accounting loss: you start from accounting results and apply the same adjustments used to compute taxable income. The resulting loss can then be carried forward to set against future taxable income, reducing tax in profitable periods.

Carrying losses forward

The core mechanism is carry-forward: a loss that cannot be used in the period it arises is carried into future periods. Key features to understand:

• Losses are generally carried forward, not back to earlier profitable years
• They can be carried forward indefinitely in principle, subject to conditions
• They must be used in order, applying earlier losses before later ones
• Only losses arising after corporate tax took effect are relievable

This makes early, accurate loss calculation important, a loss recorded incorrectly today affects relief for years.

The offset cap

You cannot wipe out a profitable period entirely with brought-forward losses. There is a cap: a carried-forward loss can generally offset up to 75% of the taxable income of the later period. Anything above that 75% is taxed, and the unused loss carries forward again.

The figures above are illustrative only, confirm the current percentage and any exceptions with the FTA, as these can change.

Continuity conditions

Loss relief is designed to support genuine ongoing businesses, not to be bought and sold. Two broad conditions matter:

• Ownership continuity, broadly, the same owners must retain a continuing majority stake. A significant change in ownership can restrict carried-forward losses.
• Same or similar business, where ownership changes substantially, losses may only survive if the company continues the same or a similar business.

These rules prevent loss-trafficking, where a loss-making shell is acquired purely to shelter someone else's profits. If your ownership is changing, check the impact on losses before completing the transaction.

Losses within groups

Where companies are connected, losses can sometimes be used more flexibly:

• Within a tax group, the members are treated as a single taxable person, so profits and losses are effectively netted.
• Outside a tax group, loss transfers between qualifying group members may be possible, subject to ownership thresholds and other conditions.

The interaction between losses and groups is one of the more technical areas of the regime. Our corporate tax groups guide explains how grouping works and when forming one helps. Confirm eligibility for any transfer before relying on it.

What you must document

Because the FTA can review how a loss arose and how it is used, keep clear evidence:

• The computation showing how each loss was calculated
• Financial statements for the loss-making period
• A running schedule of losses brought forward, used and remaining
• Ownership records demonstrating continuity
• Evidence the same or similar business continues, where relevant

A loss without documentation is a loss you may not be allowed to use. Our corporate tax financial statements guide covers the accounts that underpin these computations.

Common mistakes with tax losses

• Assuming losses can be carried back, they generally cannot
• Forgetting the 75% offset cap and over-claiming
• Ignoring the impact of an ownership change on brought-forward losses
• Failing to use losses in the correct order
• Trying to use pre-corporate-tax losses
• No schedule or documentation to support the carried-forward balance

Plan losses, do not just record them

Loss relief rewards businesses that track their position deliberately. Maintain a loss schedule from the first period, model the offset cap into your forecasts, and check the continuity conditions before any ownership change or restructuring. Because percentages, conditions and group rules can change, confirm the current treatment with the FTA before relying on a particular outcome.

How Aureus Worldwide helps

Aureus Worldwide helps UAE businesses calculate, track and use corporate tax losses correctly, preparing the loss computation, maintaining a defensible carry-forward schedule, and advising on the offset cap, continuity conditions and group transfers. Our tax team and accounting team keep the underlying numbers clean so your loss position holds up under review. To make the most of your tax losses, contact us.

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