The bulletin explains the definition of Corporate Tax Losses, available relief mechanisms, and the rules governing the use, transfer and forfeiture of Tax Losses under the Corporate Tax Law.

RF Report

The UAE Federal Tax Authority (FTA) has issued a Basic Tax Information Bulletin – Corporate Tax Losses  on 25 June 2026, providing guidance on the treatment of Corporate Tax Losses under the Corporate Tax Law. The bulletin explains the definition of a Tax Loss, the available relief mechanisms, and the conditions and restrictions governing the use and transfer of losses.

The guidance is presented in a question-and-answer format covering the following key topics:

  1. Who should read this information bulletin?

Anyone who is responsible for the tax affairs of a Taxable Person who wants to understand:

  • What is a Tax Loss?
  • What is not a Tax Loss?
  • What relief is available for Tax Losses?
  • How does relief for carried forward Tax Losses work?
  • What are the limitations on the carry forward of Tax Losses?
  • Under what circumstances are Tax Losses forfeited?
  • What are the conditions for the transfer of Tax Losses and what is available for transfer?
  • What is the impact of electing for Small Business Relief (SBR)?
  1. What is a Tax Loss?

For Corporate Tax purposes, a Tax Loss arises when deductible expenses exceed income that is subject to Corporate Tax in a given Tax Period. It is effectively negative Taxable Income, calculated by adjusting Accounting Income according to the Corporate Tax Law.

  1. What is not a tax loss?

The following are not considered Tax Losses and cannot be used to offset Taxable Income:

  • Losses incurred before Corporate Tax came into effect on 1 June 2023.
  • Losses incurred before a person became a Taxable Person under the Corporate Tax Law.
  • Losses from activities that do not result in Taxable Income (e.g., those related to Exempt Income).
  1. What relief is available for tax losses?

A Taxable Person has two primary relief options:

  1. Carry forward Tax Losses to offset against their own future Taxable Income.
  2. Transfer Tax Losses to another Taxable Person to offset against that person’s Taxable Income.

 

  1. How does relief for carried forward Tax Losses work?

A Taxable Person can carry forward their own Tax Losses indefinitely into future periods. Key utilization rules include:

  • 75% Limit: The total Tax Losses offset in a subsequent period is limited to 75% of the Taxable Income for that period (before any loss relief).
  • FIFO Basis: The oldest Tax Losses must be offset before more recent ones.
  • Fullest Extent Rule: A Taxable Person must utilise carried forward losses to the maximum extent allowed (the 75% limit) before carrying any remainder forward; they cannot choose to offset a lower amount to save losses for later.
  • Priority: A Taxable Person must use their own carried forward losses before using losses transferred from another person. Similarly, they must fully utilise their own losses before they are permitted to transfer any remaining losses to another person.
  1. What are the limitations on the carry forward of Tax Losses?

Carry forward is restricted if there is a change in ownership of more than 50%. This occurs if the ownership interests (direct or indirect) at the end of the utilisation period differ by more than 50% from those at the start of the period when the loss arose.

  • Continuity of Business: If ownership changes by more than 50%, losses can only be carried forward if the Taxable Person continues the same or a similar Business or Business Activity.
  • Factors for Continuity: Evaluation factors include using the same assets, maintaining core identity/operations, and ensuring changes result from developing existing assets or products.
  • Listed Exception: These limitations do not apply if the Taxable Person’s shares are listed on a Recognised Stock Exchange.
  1. Under what circumstances are Tax Losses forfeited?

Tax Losses are forfeited in various circumstances, including:

  • When a Taxable Person changes its Business or Business Activity following a change in ownership of more than 50%.
  • When a Taxable Person deregisters for Corporate Tax.
  1. What are the conditions for the transfer of Tax Losses?

The following conditions must be met to transfer losses between Taxable Persons:

No. Condition Explanation
1 Juridical person Both must be juridical persons (e.g., LLCs); losses cannot be transferred to or from a natural person.
2 Resident Person Both must be Resident Persons; transfer to/from a Non-Resident (including UAE branches of foreign companies) is not possible.
3 75% ownership One must own at least 75% of the other, or a third person must own at least 75% of each. This must be maintained from the start of the loss period to the end of the offset period.
4 Not Exempt Neither person can be an Exempt Person.
5 Not a QFZP Neither person can be a Qualifying Free Zone Person.
6 Financial Year Both must have Financial Years ending on the same date.
7 Accounting Standard Both must use the same accounting standards (e.g., both IFRS).

What is available for transfer? Taxable Persons can transfer unused Tax Losses from the current period or those carried forward from previous periods. The parties choose the amount to transfer, but the total offset (own losses + transferred losses) cannot exceed 75% of the recipient’s Taxable Income.

  1. What is the impact of electing for Small Business Relief (SBR)?

When a Resident Person elects for SBR:

  • No new Tax Losses can arise in that period.
  • Existing losses carried forward from non-SBR periods cannot be utilized or transferred during the SBR period.
  • These losses can still be carried forward and used or transferred in future periods when SBR no longer applies.
  1. Further information

For more details, refer to the Corporate Tax guides and public clarifications on the Federal Tax Authority (FTA) website. Relevant provisions are also found in Articles 37, 38, and 39 of the Corporate Tax Law.