Key takeaways
- A UAE company with a corporate tax loss can offset it against the taxable income of another UAE company only if one holds at least 75% of the other, or a third person holds at least 75% of both, under Article 38 of Federal Decree-Law No. 47 of 2022.
- Both companies must be UAE-resident juridical persons with the same financial year end and the same accounting standards, and neither can be an Exempt Person or a Qualifying Free Zone Person.
- The ownership link must run without a break from the start of the period in which the loss arose until the end of the period in which the loss is used.
- Transferred losses are capped: the receiving company can offset losses only up to 75% of its taxable income before loss relief, and the company that gives up the loss reduces its own available losses by the amount transferred.
- Each company must use its own carried-forward losses before it uses a transferred loss, and a company must offset a loss against its own income before it can transfer what remains.
- A tax group is the alternative for companies that hold at least 95%: the group is treated as one Taxable Person, and the members are jointly and severally liable for its corporate tax.
What is a tax loss transfer between group companies in the UAE?
A tax loss transfer lets a loss-making UAE company offset all or part of its tax loss against the taxable income of a related UAE company, instead of carrying the loss forward alone. The right comes from Article 38 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, and it is separate from the tax group regime in Article 40.
The two companies stay separate Taxable Persons. Transfer is optional, whereas carrying forward an unused loss is not: the FTA's Determination of Taxable Income guide states that moving a loss to another company is a choice but carrying forward any unused loss is not. Say a company in your group lost AED 1,000,000 this year and a sister company made AED 2,000,000 of taxable income before loss relief. A transfer would lower the sister company's taxable income to AED 1,000,000 for that period (a labelled illustration, not a calculation of tax).
Which conditions must group companies meet to transfer losses?
Eight conditions in Article 38 must all be met; missing one means no transfer. The table sets them out as the consolidated Decree-Law text on the Ministry of Finance site reads, checked 31 October 2026.
| Condition | What Article 38 requires |
|---|---|
| Legal form | Both are juridical persons (companies, not individuals) |
| Residence | Both are Resident Persons for corporate tax |
| Ownership | One holds at least 75% of the other, directly or indirectly, or a third person holds at least 75% of each |
| Duration | The ownership exists from the start of the period in which the loss arose until the end of the period in which it is offset |
| Exempt status | Neither is an Exempt Person |
| Free zone status | Neither is a Qualifying Free Zone Person |
| Financial year | Both have the same Financial Year end |
| Accounting standards | Both use the same accounting standards |
Free zone companies are not shut out as a class. The exclusion applies to a Qualifying Free Zone Person, so a free zone company that is not one (for example, because it falls outside the qualifying conditions for the period) can still be a party to a transfer.
How much of a transferred loss can the receiving company use?
The receiving company can offset losses only up to 75% of its taxable income before loss relief, unless the Cabinet sets a different percentage. This cap in Article 37(2) applies to carried-forward losses and transferred losses together, so a transfer cannot wipe out the receiving company's income.
75%: the maximum share of a company's pre-relief taxable income that tax losses (carried forward and transferred combined) can offset in a tax period. Source: Federal Decree-Law No. 47 of 2022, Articles 37(2) and 38, consolidated text published by the Ministry of Finance (January 2026), checked 31 October 2026.
The company giving up the loss reduces its available tax losses by the amount transferred, so the same loss cannot be used twice. Ordering matters too. Article 37(4) says a carried-forward loss is set against the current period's taxable income first, and only then can a transferred loss be used. The FTA guide gives an example: in year one, Company A has an AED 8,000,000 loss and transfers up to 75% of Company B's taxable income; AED 5,000,000 stays with Company A. In year two, Company A, with AED 4,000,000 of taxable income, must first use AED 3,000,000 of its carried-forward loss against its own income, and only the remaining AED 2,000,000 can go to Company B.
The official sources checked show no Cabinet decision changing the 75% figure; confirm the current percentage on the Ministry of Finance site before you rely on it.
What losses can't be transferred?
A loss cannot be transferred or carried forward if it arose before corporate tax began, before the company became a Taxable Person, or from an asset or activity whose income is exempt. These exclusions sit in Article 37(3) and apply before the transfer rules come into play.
Carried-forward losses also face an ownership test of their own. Under Article 39, a company can use carried-forward losses only if the same person or persons held at least 50% of it from the start of the loss period to the end of the period of use, or, after a change of more than 50%, it kept running the same or a similar business. Listed companies are outside this limit.
When does a tax group fit better than a loss transfer?
A tax group fits when the companies hold at least 95% and you want their results pooled permanently; a loss transfer fits when ownership sits between 75% and 95% or you want to move only a chosen amount.
| Feature | Loss transfer (Article 38) | Tax group (Article 40) |
|---|---|---|
| Ownership needed | At least 75% (or a common 75% owner) | Parent owns at least 95% of share capital, voting rights, and profits and net assets |
| Taxable Person status | Each company stays separate | Group treated as one Taxable Person, represented by the parent |
| Liability | Each company for its own tax | Members jointly and severally liable for the group's tax |
| Scope | Chosen amount of loss, subject to the 75% cap | Group results taken together |
| Excluded entities | Exempt Persons, Qualifying Free Zone Persons | Exempt Persons, Qualifying Free Zone Persons |
Ministerial Decision No. 301 of 2024 replaced Ministerial Decision No. 125 of 2023 for tax periods starting on or after 1 January 2025, and it deals with how a tax group uses losses a member brought in before joining. If you are forming or joining a group, read the decision that applies to your tax period. If you'd rather not track these dates by hand, the free UAE compliance calendar lists them for your company.
What most guides don't tell you
Three practical points tend to be missed in summaries of the rule.
- A mid-year share sale can break the link. The 75% ownership must run unbroken from the start of the loss period to the end of the period of use, so a restructuring, a new investor or a share transfer partway through a year can remove the right to transfer for that loss.
- Your own losses come first on both sides. The giving company must offset the loss against its own income before it transfers the rest, and the receiving company must use its own brought-forward losses before it touches a transferred loss.
- Free zone status is tested company by company. A group with both mainland and free zone members may find only some members eligible, because Qualifying Free Zone Persons are excluded. Map each entity's status for each tax period before you draw up the structure.
Which deadlines apply to your company?
Loss transfers sit alongside return filing, registration and payment dates that differ by financial year end. The free UAE compliance calendar is a calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.
Frequently asked questions
Can I carry forward tax losses in the UAE?
Yes. Under Article 37 a tax loss can be offset against taxable income of later tax periods, capped at 75% of that period's taxable income before loss relief. Carrying forward an unused loss is not optional, and Article 39 adds an ownership or business continuity test.
What is a tax group and should I form one?
A tax group treats a parent and its subsidiaries as one Taxable Person when the parent owns at least 95% of each subsidiary's share capital, voting rights, and profits and net assets. Whether to form one depends on your ownership levels and your appetite for joint and several liability, so take advice on your own facts.
What is the interest limitation rule?
Under Article 30, net interest expenditure is deductible up to 30% of accounting earnings (EBITDA), and Ministerial Decision No. 126 of 2023 removes the limit where net interest expenditure for the period does not exceed AED 12,000,000. Disallowed amounts can be carried forward for ten tax periods.
About Qawi
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
- Federal Decree-Law No. 47 of 2022 and its amendments, consolidated text (Ministry of Finance, January 2026): Articles 30, 37, 38 and 39
- Federal Decree-Law No. 47 of 2022 (UAE Legislation portal): Article 40
- Corporate Tax Guide: Determination of Taxable Income (FTA, July 2024)
- Ministerial Decision No. 126 of 2023 on the General Interest Deduction Limitation Rule (Ministry of Finance)
- Ministerial Decision No. 301 of 2024: Tax Group (PwC Middle East summary, used for effective date only)
Last checked: 31 October 2026
This is general information, not tax or legal advice for your specific situation.