A tax loss never expires, but you don't get to choose when to spend it.

What counts as a Tax Loss, and what doesn't

The Corporate Tax Law defines a Tax Loss as "any negative Taxable Income" for a Tax Period (Art. 1). It is not your accounting loss. You start from the accounting result and make the adjustments the law requires (disallowed expenses, exempt income, interest limits and so on), and only a negative figure after those adjustments is a Tax Loss. A business can show a loss in its accounts and still have Taxable Income, and the reverse.

Article 37(3) then removes three kinds of loss from relief entirely:

• Losses from before Corporate Tax began. Nothing incurred before the regime applied to you can be carried in. The FTA's bulletin is explicit that losses from before 1 June 2023 "cannot be carried forward and offset against the Taxable Income of any Tax Period".
• Losses from before you became a Taxable Person. A company that became taxable part-way through its life cannot bring in its earlier losses.
• Losses from an asset or activity whose income is exempt or otherwise not taken into account. A loss on something that would have produced Exempt Income, such as a qualifying shareholding, is not a Tax Loss.

How carry-forward works: no time limit, oldest first

Under Article 37(1) a Tax Loss is set against the Taxable Income of later Tax Periods. The law sets no expiry date, and the FTA's bulletin confirms that a Taxable Person "can carry forward its own Tax Losses indefinitely". There is no carry-back: a loss this year does not recover tax paid last year.

The bulletin adds the ordering rules:

• Oldest losses are used first.
• Your own losses come before any losses transferred to you from a group company (Art. 37(4)).
• You must use your own losses in full before you can transfer any to another company for that period.

The 75% cap, and the rule that you can't hold back

Article 37(2) limits the loss used in any later period to 75% of that period's Taxable Income before loss relief. The law allows the Cabinet to change the percentage or to prescribe exceptions; we found no Cabinet Decision that has done either. The remaining 25% is taxed in the normal way, however large your stock of losses.

Article 37(4) adds that a loss carried into a period "must be set off" against that period's income before any remainder goes further. The FTA reads this as a fullest-extent rule. Its own example: a company with AED 1,000,000 of Taxable Income and AED 3,000,000 of losses brought forward must offset AED 750,000. It is left with Taxable Income of AED 250,000 and carries AED 2,250,000 forward. The bulletin states that "it is not possible to choose to offset a lower amount than 75% of Taxable Income and thereby carry forward more Tax Losses".

Where the forced offset costs you: the AED 375,000 zero band

The 0% band in Article 3(1) applies to Taxable Income after loss relief. Add the fullest-extent rule and a consequence follows. In a year with modest profits, you must spend losses to shelter income that would have been taxed at 0% anyway. The table is our own arithmetic, not an official example. Each company has more losses brought forward than it can use, and pays tax at the ordinary rates:

"Loss that saved no tax" is the part of the forced offset that sat inside the zero band. Without losses, the company would have paid 9% only on income above AED 375,000, so that part of the offset brought no saving. Our derivation: below AED 375,000 of pre-relief income the whole offset is wasted. Between AED 375,000 and AED 1,500,000 the waste is AED 375,000 minus 25% of the income. From AED 1,500,000 upwards, every dirham of loss used saves 9%.

This is a reading of how two rules interact, not a statement from the FTA. It does not mean you should report differently: the offset is mandatory. It matters for planning, because a stock of losses is worth less than 9% of its face value to a business that expects to stay under about AED 1.5 million of taxable profit a year. It also matters for the next section.

Small Business Relief freezes losses rather than burning them

Small Business Relief treats an electing business as having no Taxable Income for the period (Art. 21 of the law, MD 73/2023). The FTA's bulletin draws out what that means for losses. No Tax Loss can arise in an SBR period. Losses brought forward from non-SBR periods "cannot be utilised or transferred in a Tax Period where SBR is applied", but they stay available for later periods in which SBR is not elected.

Put that next to the fullest-extent rule. A business with Revenue under AED 3,000,000, losses brought forward and a modest profit this year has two options. Without the election, it must spend 75% of its income in losses, most or all of it in the zero band. With the election, its tax is nil and its losses are left untouched. Take the first row of the table: with AED 300,000 of taxable profit, the business would use AED 225,000 of losses for no saving. Under SBR it keeps them. This is our own reading of the bulletin together with Article 37(4), and it assumes the business qualifies for SBR in that year. It is the other side of the point in our Small Business Relief guide: electing in a loss year forfeits that year's loss, while electing in a small profit year can preserve older ones. The election is made period by period, so both can be true of the same business in different years.

A change of ownership above 50%

Article 39(1)(a) allows a loss to be used only if the same person or persons held at least 50% of the ownership continuously, from the start of the period in which the loss arose to the end of the period in which it is used. Ownership includes direct and indirect interests carrying rights to profits and liquidation proceeds. The FTA's example: five shareholders each hold 20%, and three of them sell at the same time. That is a 60% change.

A change above 50% does not end the loss automatically. Under Article 39(1)(b) it survives if the company continued the same or a similar business after the change. Article 39(2) gives the factors, and the bulletin says the list is not exhaustive:

• the company still uses some or all of the same assets;
• it has not made significant changes to the core identity or operations of its business;
• any changes come from developing or exploiting assets, services, processes, products or methods that existed before the change.

Companies whose shares are listed on a Recognised Stock Exchange are outside this rule (Art. 39(3)). For anyone buying a loss-making company, this is the test that decides whether its losses have value, and it runs from the start of the loss period, not from the date of the sale.

When losses are lost

The FTA's bulletin says that there are "many circumstances" in which losses are forfeited and names two: a change of business after a more-than-50% ownership change, and deregistration from Corporate Tax. A company closed down with losses on its books takes them with it; they do not pass to the shareholders.

Transferring a loss to a group company

Article 38 lets a loss (or part of it) be set against another company's Taxable Income without forming a tax group, if all eight conditions hold:

If the conditions hold, the companies choose how much to transfer; it does not have to be the maximum. There is no limit on the number of companies a loss can go to. The 75% cap applies to the receiving company: its own losses and all transferred losses together cannot exceed 75% of its Taxable Income (Art. 38(2)(b)), and its own losses go first. Whatever is not transferred stays with the company that incurred it.

Tax groups and restructurings

• Joining a tax group (Art. 40(3)–(5)). A subsidiary's losses from before joining become losses of the group, but can only be used against the group income attributable to that subsidiary. The group's existing losses cannot be used against the income of the newcomer. Articles 37 and 39 still apply.
• Leaving (Art. 40(6)). Losses stay with the group, except the departing subsidiary's unused pre-grouping losses.
• Cessation (Art. 40(7)). If the parent stays a Taxable Person, the losses stay with it. If not, the group's losses cannot be used by the individual subsidiaries, except their own unused pre-grouping losses.
• Business Restructuring Relief (Art. 27(3)(d) and (5)). On a qualifying transfer of a business, the transferor's unused losses may pass to the transferee, subject to conditions set by the Minister. Where only an independent part of a business moves, only the losses reasonably attributable to that part can go.

A check before you file

• Rebuild the loss from the tax computation, not from the accounts. Is the figure negative after adjustments?
• Strip out what can't be relieved: anything from before you became taxable, and losses tied to exempt income.
• Apply the 75% cap and use losses to that limit, oldest first, own losses before transferred ones.
• Check the ownership line from the start of each loss year to today. Has more than 50% changed? If so, document how the business has stayed the same.
• If you are under AED 3,000,000 of Revenue with losses brought forward and a modest profit, compare electing Small Business Relief this year with using the losses.
• For group transfers, test all eight conditions, in particular year ends, accounting standards and QFZP status.
• File on time. See the 30 September deadline and penalties.

Frequently asked questions

Sources

• Definition, carry-forward, 75% cap, transfer, ownership change, tax groups, restructurings — Federal Decree-Law No. 47 of 2022 (PDF), Arts. 1, 3, 21, 27, 37–40, Ministry of Finance
• Fullest-extent rule, ordering, forfeiture, transfer conditions explained, Small Business Relief — Basic Tax Information Bulletin: Corporate Tax Losses (PDF, 25 June 2026), Federal Tax Authority
• Loss forfeiture in an electing period — Ministerial Decision No. 73 of 2023 (PDF), Arts. 4–5, Ministry of Finance
• Later amendments checked — Federal Decree-Law No. 60 of 2023 (PDF), Ministry of Finance
• Legislation library and guides — Ministry of Finance · FTA Corporate Tax guides and references

Verified 25 September 2026. On that date we downloaded the Corporate Tax Law from the Ministry of Finance and read Articles 1, 3, 27 and 37 to 40 in the published English translation, and downloaded and read in full the FTA's seven-page Basic Tax Information Bulletin on Corporate Tax Losses (25 June 2026). We checked Federal Decree-Law No. 60 of 2023, which amends Articles 1, 3 and 65 and not the loss provisions. Federal Decree-Law No. 28 of 2025 concerns tax credits and refunds and, as far as we could establish, does not touch Articles 37 to 39. We found no Cabinet Decision changing the 75% figure or prescribing exceptions to it. Three things here are our own work and are marked where they appear: the zero-band table and the formula for the "wasted" part of the forced offset; the observation that electing Small Business Relief in a small profit year can preserve brought-forward losses; and the note on what a buyer should check. None of this is advice on your own position; for an ownership change, a group transfer or a restructuring, speak to a registered tax agent.

Related

• Corporate tax calculator: the 0% and 9% bands, with Small Business Relief and the QFZP option included.
• Small Business Relief, extended to 2029: the election that freezes brought-forward losses and forfeits a loss year's own loss.
• Qualifying Free Zone Person: the regime that shuts a company out of loss transfers and tax groups.
• The 30 September 2026 deadline, now passed: where the loss is claimed, and what a late return costs.