UAE Corporate Tax Losses Explained

The introduction of Corporate Tax in the UAE has brought about significant changes in how businesses operate. One key aspect that business owners should be aware of is the treatment of tax losses.

What are Tax Losses?

A tax loss occurs when the total deductible expenses of a business exceed its total taxable income for a specific tax period. Under the UAE Corporate Tax Law, businesses are allowed to offset these losses against future taxable income, thereby reducing their tax liability.

Key Provisions

• Carry Forward: Tax losses can be carried forward indefinitely, provided that the same shareholder(s) continue to own at least 50% of the shares.
• Offset Limit: Tax losses can offset up to 75% of the taxable income in subsequent tax periods.
• Transfer of Losses: Tax losses can be transferred between group companies under certain conditions, provided they are resident legal persons and share at least 75% common ownership.

Understanding these provisions is crucial for effective tax planning and ensuring compliance with the new regulations.