UAE Corporate Tax Losses: Carry Forward Rules and Limits

UAE companies can carry forward tax losses, but only against 75% of later taxable income. See what blocks relief and how ownership changes affect it.

30 October 2026Qawi8 min read

Key takeaways

Yes: a UAE company with a corporate tax loss can carry that loss forward and offset it against taxable income in later tax periods, under Article 37 of Federal Decree-Law No. 47 of 2022.
The amount of carried-forward loss a UAE company can use in any later tax period cannot exceed 75% of that period's taxable income before loss relief, unless a Cabinet decision sets another percentage.
UAE corporate tax losses cannot be carried back to earlier tax periods, and losses incurred before corporate tax started, or before the company became a taxable person, get no relief.
A UAE company that changes ownership by more than 50% keeps its carried-forward losses only if it continues the same or a similar business; the rule does not apply to companies listed on a recognised stock exchange.
A loss made in a year when a UAE business claims Small Business Relief cannot be carried forward, so the election has a cost that is easy to miss.
Losses can move between group companies only if every Article 38 test is met, including 75% common ownership and a shared year-end, and Qualifying Free Zone Persons are excluded.

Can a UAE company carry forward tax losses?

Yes. Article 37 of Federal Decree-Law No. 47 of 2022 allows a tax loss to be offset against the taxable income of subsequent tax periods. A tax loss is negative taxable income for a tax period, so it can differ from your accounting loss because it is worked out after the tax adjustments.

The FTA's Determination of Taxable Income guide also says there is no carry-back: a loss can only go forward, never into earlier periods. The text of Articles 37 to 39 sets no expiry date on a carried-forward loss; the limits come from the 75% cap, the ownership tests and the exclusions below.

How much of a carried-forward loss can I use each year?

You can use carried-forward losses to reduce up to 75% of your taxable income for the period, calculated before loss relief. So at least 25% of taxable income stays in the tax base.

Relief is not optional: per the FTA's guide, if your brought-forward losses are less than 75% of the current income, you must use all of them now. Your own carried-forward losses also come before any loss transferred to you from another company (Article 37(4)).

Say a hypothetical SHAMS trading company has AED 2,000,000 of carried-forward losses and AED 1,200,000 of taxable income before loss relief this year; the table shows the result.

Item	Amount (hypothetical)
Carried-forward loss at start of year	AED 2,000,000
Taxable income before loss relief	AED 1,200,000
Maximum loss relief (75%)	AED 900,000
Taxable income after loss relief	AED 300,000
Loss carried to next year	AED 1,100,000

75%: the maximum share of a period's taxable income that carried-forward tax losses can offset. Source: Federal Decree-Law No. 47 of 2022, Article 37(2), checked 30 October 2026.

Which losses can't be carried forward?

Three kinds of loss get no relief under Article 37(3): losses incurred before corporate tax started, losses incurred before the person became a taxable person, and losses from an asset or activity whose income is exempt or otherwise disregarded. A fourth restriction applies if you claimed Small Business Relief.

Situation	Can the loss be carried forward?	Source
Loss from before corporate tax started	No	Article 37(3)(a)
Loss from before the person became a taxable person	No	Article 37(3)(b)
Loss from an exempt or disregarded activity	No	Article 37(3)(c)
Loss in a period when Small Business Relief is elected	No	Ministerial Decision No. 73 of 2023, Article 4(1)
Loss from a period when Small Business Relief was not elected	Yes, subject to Article 37	Ministerial Decision No. 73 of 2023, Article 4(2)

Small Business Relief treats an eligible business as having no taxable income for the period, and Ministerial Decision No. 73 of 2023 sets the revenue limit at AED 3,000,000. Under that decision the relief continues only for tax periods that end on or before 31 December 2026; check the FTA for any later change before you plan around it. So a business expecting a loss this year should weigh the relief against the loss it would give up: if you expect taxable profits later, that loss could be worth keeping.

What happens to my losses if ownership changes?

If the owners change by more than 50%, you keep the right to carry losses forward only if the company continues to conduct the same or a similar business or business activity. Article 39 sets two conditions in the alternative: either the same persons held at least 50% continuously from the loss period to the offset period, or the business carries on the same or a similar activity after the change.

For "same or similar", Article 39(2) points to factors such as whether the company still uses substantially the same assets and has avoided significant changes to its core identity or operations. Companies whose shares are listed on a recognised stock exchange are outside this rule (Article 39(3)).

This matters most in a sale: a buyer who plans to repurpose the entity for a different line of business may find the losses are worth little.

Can losses be transferred to another company?

Yes, but only between closely linked companies, and only if every Article 38 condition is met. Both must be resident juridical persons, and:

One company holds at least 75% of the other directly or indirectly, or a third person holds at least 75% of each.
The common ownership exists from the start of the tax period in which the loss arose until the period in which it is used.
Neither company is an Exempt Person or a Qualifying Free Zone Person.
Both companies have the same financial year end and use the same accounting standards.

The receiving company's total offset still cannot exceed the 75% cap, and the company making the transfer reduces its own available losses by the amount transferred. The transfer is a choice, but carry-forward is not. Groups that form a Tax Group are treated differently: under Article 42(3), a subsidiary's unused pre-grouping losses become losses of the group, still subject to Articles 37 and 39.

How do I make sure I use my losses properly?

Treat losses as a record you maintain each year. The steps below are a practical routine, not a statutory procedure.

Calculate the tax loss for the period from your accounting income after the Article 20(2) adjustments, using the books your corporate tax return will rely on.
Check that the loss is eligible: after the start of corporate tax, from a taxable person, from non-exempt income, and not from a Small Business Relief period.
At each later year, work out taxable income before loss relief, then apply carried-forward losses up to 75% of it.
Record any ownership change above 50% and whether the same or similar business continues, because Article 39 applies each time you use the loss.
Report the loss relief in your corporate tax return on EmaraTax and keep a loss register by period.

If you'd rather not track these dates by hand, the free UAE compliance calendar lists them for your company: it is a free calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.

What most guides don't tell you

Relief is mandatory, not elective. Under the FTA's guide, if your losses are below the 75% cap you must use them in full in the current period, which can surprise a company that wanted to save some for a bigger year.
Ownership changes can happen without a sale. The 50% test looks at who holds the interests over time, so an investor round or a partner exit can move you past the 50% line even though no company was sold in the usual sense. Check the cap table before any equity event, not after.
Free zone status changes the answer. Qualifying Free Zone Persons cannot transfer or receive losses under Article 38, so a group that mixes mainland and Qualifying Free Zone entities cannot assume its losses can be pooled.

Which deadlines apply to your company?

Loss relief depends on filing your return correctly and on time, and deadlines differ by company. The free UAE compliance calendar shows the corporate tax and other filing dates for your company.

Frequently asked questions

How do tax loss transfers between group companies work?

A loss can be offset against another taxable person's income only if both are resident juridical persons, one holds at least 75% of the other (or a third person holds 75% of each) from the start of the loss period, neither is an Exempt Person or Qualifying Free Zone Person, and they share a financial year end and accounting standards (Article 38). The receiving company's offset still counts towards its 75% cap.

What is a tax group and should I form one?

A Tax Group is treated as a single taxable person represented by its parent company (Article 40(4)), and a subsidiary's unused pre-grouping losses become carried-forward losses of the group, subject to Articles 37 and 39 (Article 42(3)). Whether forming one makes sense depends on your ownership structure and where your profits and losses sit, so get advice on your own facts.

How is taxable income calculated from accounting profit?

Taxable income starts from accounting income and is then changed by the adjustments listed in Article 20(2) of Federal Decree-Law No. 47 of 2022. Tax loss relief under Chapter Eleven is one of those adjustments, applied after taxable income has been worked out before loss relief.

About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn

Sources

Last checked: 30 October 2026

This is general information, not tax or legal advice for your specific situation.