Tax losses under UAE Corporate Tax: carry-forward, the 75% cap, and the continuity tests

The core mechanics

A tax loss arises when the Corporate Tax computation goes negative. It carries forward indefinitely — no expiry — but with a throttle: in any later period, brought-forward losses can offset at most 75% of that period's taxable income. A company with AED 1,000,000 of taxable income and ample losses still pays 9% on AED 250,000. The design guarantees the FTA a minimum current-year take while still letting the losses work.

A worked example

Year 1: loss of AED 800,000. Year 2: taxable income AED 600,000. Offset is capped at 75% × 600,000 = AED 450,000 — taxable income becomes AED 150,000 (tax AED 0 under the 375k band), and AED 350,000 of losses carry on. The cap and the 0% band interact: small profits often pay nothing anyway, and the losses live to shelter bigger years.

What kills a carried loss

• Ownership discontinuity: if more than 50% of ownership changes hands, the losses survive only if the business continues the same or a similar activity — sell a loss-making company for its tax losses and pivot it, and the losses die
• Small Business Relief: losses arising in a period where the relief is claimed cannot be carried forward — electing in a loss year burns the loss
• Pre-regime history: losses from periods before Corporate Tax applied to you never enter the system
• Exempt income doesn't create them: exempt-participation write-downs and other exempt-stream costs don't manufacture usable losses

Sharing losses in a group

Outside a full tax group, one UAE company can transfer its current-year tax loss to another where common ownership is at least 75%, both are UAE juridical residents, and neither is exempt or a Qualifying Free Zone Person — the receiving company applies the same 75% offset cap. Inside a registered tax group, losses net automatically in the consolidated computation. The practical planning question is sequencing: which entity's losses to use, transfer or bank, decided before year-end while the choices are still open.

How Orbit applies this

Orbit maintains the loss register per entity — vintage, amount, what has been used — applies the 75% cap in the CT working automatically, and flags the continuity tests when ownership changes touch the cap table, so a decade of carried losses doesn't evaporate through a transaction nobody checked.