UAE corporate tax losses: carry-forward and the 75% limit

An accounting loss, a low bank balance and a corporate tax loss are not interchangeable. A tax loss is determined after the adjustments required by the corporate tax rules. Its usefulness in a later period also depends on conditions, the amount of taxable income available and changes in the business or ownership.

The FTA’s June 2026 Corporate Tax Losses bulletin explains the current framework. It confirms that eligible losses can be carried forward indefinitely, subject to the applicable conditions, and that utilisation is limited by the rules for the later period. “Indefinitely” should not be read as “automatically usable regardless of what happens to the company”.

Establish the tax loss before carrying it forward

Start with the approved accounts and the taxable-income reconciliation. An expense disallowed for tax can make the tax loss smaller than the accounting loss, or produce a positive taxable-income result despite an accounting deficit. Keep that bridge rather than copying the retained-loss balance from the balance sheet.

Losses before corporate tax commenced, before the person became taxable, or from exempt activities do not simply become a pool available for later offset. Identify the relevant entity, period and tax treatment for each amount. The Corporate Tax Law, Articles 37–39 provides the underlying loss framework.

Maintain a loss register by originating period. Record the approved amount, adjustments, amounts used or transferred and the remaining balance. Include references to the return and working papers that establish the opening figure. A spreadsheet with only one accumulated total makes later ownership and eligibility reviews much harder.

Apply the utilisation limit before the ordinary rate bands

The general limit is 75% of the later period’s taxable income before loss relief. That is different from using 75% of the loss balance or reducing the final tax bill by 75%. Determine the pre-relief taxable income first, calculate the cap and compare it with the eligible available losses.

Consider an illustrative ordinary taxable company with AED 2 million of eligible brought-forward losses and AED 1.6 million of current taxable income before loss relief. Assume the conditions for use remain satisfied, with no Small Business Relief election, special regime, transferred losses or credits affecting the example.

Step	AED
Current taxable income before loss relief	1,600,000
75% utilisation cap	1,200,000
Eligible brought-forward loss used	1,200,000
Taxable income after loss relief	400,000
Remaining carried-forward loss	800,000

The ordinary rate calculation then leaves AED 25,000 above the AED 375,000 zero-rate band, producing AED 2,250. The company does not use all AED 2 million simply because the balance is larger than this period’s income. Nor does the retained AED 800,000 represent a cash refund.

Do not choose a smaller offset just to preserve losses

The FTA bulletin says own brought-forward losses must be used to the fullest extent permitted, with older losses used first. A taxpayer cannot deliberately use a smaller amount merely because the ordinary rate calculation would already produce no tax.

Continue the illustrative example into a later period with AED 400,000 of pre-relief taxable income and the AED 800,000 loss balance. The 75% cap is AED 300,000. Using that amount leaves AED 100,000 of taxable income and AED 500,000 of carried-forward losses, assuming the same eligibility conditions continue.

The ordinary tax in this second example is zero because the remaining taxable income falls within the ordinary band. It would still be wrong to choose a smaller loss offset solely to retain more losses for the future. Keep the utilisation rule and the tax-rate calculation as separate stages in the working paper.

Reassess after ownership or business changes

For juridical persons, ownership continuity can affect carry-forward and use. A change of more than 50% can require the company to establish that it continues the same or a similar business. This is a substantive review of what the business does, not merely whether its registered name or licence number remained unchanged. The FTA bulletin also identifies the recognised-stock-exchange exception.

Keep a dated ownership history and record relevant direct and indirect changes. When a transaction is proposed, give the reviewer the loss register, ownership structure before and after the change, and a description of the continuing operations. Do not assume that buying a company with losses allows the buyer to use them against an unrelated new activity.

The assessment may involve assets used, continuity of the business’s core identity and the nature of changes in operations. Record the actual facts and the review conclusion. A one-line statement that the company “still trades” is unlikely to explain a significant change in what it sells or how it operates.

Treat relief elections, transfers and closure separately

A period in which Small Business Relief is elected does not generate a tax loss. Brought-forward losses from non-SBR periods cannot be used or transferred in an SBR period, although eligible amounts may continue forward for later periods where the conditions are met. Review the SBR election with this consequence in view instead of comparing only this year’s expected payment.

Transferring losses to another person is a separate mechanism with its own conditions. Common ownership alone is not a complete test, and the recipient’s utilisation limit still matters. Establish the legal persons, residency, ownership history, financial-year alignment and other relevant conditions before assuming that one company’s loss can reduce another’s income.

Closure also deserves a review before action. The bulletin identifies corporate tax deregistration among circumstances in which losses can be forfeited. Preserve the information and seek a case-specific assessment rather than treating a loss balance as an asset that survives every reorganisation or wind-down.

Close the annual loss register

For each period, reconcile the opening loss to the preceding approved return, record current changes, document the permitted utilisation and calculate the closing balance. Check that the same loss was not both used locally and transferred elsewhere, and that ownership or election conditions were reconsidered.

Retain the register, accounts, reconciliations, ownership evidence and review decisions with the corporate tax records. The useful outcome is an evidence-backed balance that a future preparer can assess, rather than a large number carried forward in a spreadsheet without a clear origin or continuing eligibility.

Sources checked on 26 October 2026. The loss-utilisation examples assume continuing eligibility and ordinary rates; they are illustrative.

Sources

• Corporate Tax Losses bulletin
• Corporate Tax Law, Articles 37–39