Tax loss relief: what it means in UAE tax.

What tax loss relief means

Also called: Tax loss carry forward, Loss relief.

Tax loss relief is the Corporate Tax rule that lets a business use a loss from one Tax Period to reduce Taxable Income in later periods. A Tax Loss is simply negative Taxable Income. Articles 37 to 39 of the Corporate Tax Law set out how it can be used.

There is no time limit on carrying losses forward, but there is a cap: in any later period, relief cannot exceed 75% of that period's Taxable Income before loss relief. So a profitable year after a loss still leaves at least a quarter of profit in charge to tax. Losses must also be used in order, against the next available profit, before any loss transferred from a group company.

Losses can be lost. They do not survive a change of more than 50% in ownership unless the business carries on the same or a similar activity. Losses from before Corporate Tax started, or from exempt activities, never qualify. For an SME with a slow first year, this relief is valuable, so recording the loss correctly in the first return matters.

How it works

• A Tax Loss is carried forward and set against Taxable Income of later Tax Periods (Article 37(1)).
• Relief in any period is capped at 75% of Taxable Income before loss relief, unless a Cabinet decision sets a different figure (Article 37(2)).
• No relief for losses before Corporate Tax started, before the person became a Taxable Person, or from exempt income (Article 37(3)).
• Losses can be transferred between UAE resident companies with at least 75% common ownership, if all the conditions in Article 38 are met, including the same year end and accounting standards.
• Losses carried forward require the same owners to keep at least 50% continuously, or the same or a similar business to continue after a larger ownership change (Article 39).

Worked example

A new Dubai coffee shop company makes a Tax Loss of AED 500,000 in its first Tax Period. In its second period its Taxable Income before loss relief is AED 400,000. It has the same owners throughout.

Tax Loss brought forward	AED 500,000
Taxable Income before loss relief	AED 400,000
Cap at 75% of 400,000	AED 300,000
Loss relief used	AED 300,000
Taxable Income after loss relief	AED 100,000
Corporate Tax (all within the 0% band)	AED 0
Tax Loss carried forward	AED 200,000

The 75% cap leaves AED 100,000 in charge, and the unused AED 200,000 stays available for later years.

Common mistakes

• Using the whole loss in one year and ignoring the 75% cap.
• Claiming losses from before the business came within Corporate Tax, or from exempt activities.
• Electing Small Business Relief in a loss year: losses from that year cannot be carried forward (Ministerial Decision No. 73 of 2023, Article 4).

The law

• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, Article 37 (Tax Loss Relief)
• Federal Decree-Law No. 47 of 2022, Articles 38 (Transfer of Tax Loss) and 39 (Limitation on Tax Losses Carried Forward)
• Ministerial Decision No. 73 of 2023 on Small Business Relief, Article 4

Frequently asked questions

How long can a Corporate Tax loss be carried forward in the UAE?

The law sets no time limit. The loss stays available as long as the ownership and business continuity conditions in Article 39 are met.

Can a loss be carried back to an earlier year?

No. Article 37 only allows losses to be set against Taxable Income of subsequent Tax Periods.

Related terms

Taxable income · Small Business Relief · Corporate Tax group · Taxable person. See every term in the UAE tax glossary.

For the full picture, read our guide: UAE Corporate Tax Losses: How to Carry Them Forward and Use Them.

Work it out with our free UAE Corporate Tax calculator.

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