How long can tax losses be carried forward in UAE, and what can cancel them?

A tax loss can be carried forward and set against taxable income of later tax periods. The law does not put an expiry date on the carry-forward, provided the continuity conditions are met. The limit is on speed: in any one period, losses can reduce taxable income by no more than 75% of the taxable income before loss relief.

So even a company with large losses brought forward will usually pay some tax once it becomes profitable. The 25% that remains taxable is still subject to the 0% band on the first AED 375,000.

Example one: a Dubai e-commerce company made a tax loss of AED 1,000,000 in 2025. In 2026 its taxable income before relief is AED 900,000. The cap is 75% of AED 900,000, so AED 675,000 of the loss is used. Taxable income is AED 225,000, inside the 0% band, so no tax is due. AED 325,000 of loss carries on to 2027.

Example two: in 2027 the same company earns AED 2,000,000 before relief. The cap is AED 1,500,000, more than the AED 325,000 remaining, so the whole balance is used. Taxable income is AED 1,675,000 and tax is 9% of AED 1,300,000, or AED 117,000.

Article 37 excludes losses incurred before corporate tax took effect or before the person became a taxable person, and losses from assets or activities whose income is exempt or not taken into account. A loss on an investment whose dividends would be exempt does not create a usable tax loss.

Small business relief has its own rule. Under Ministerial Decision No. 73 of 2023, a loss made in a period where you elect the relief cannot be carried forward to any later period. That catches many start-ups that elect relief by default in their first, loss-making year.

Article 39 allows losses to be carried forward only if the same person or persons continuously owned at least 50% of the business from the start of the loss period to the end of the period in which the loss is used. If ownership changes by more than that, the losses can still survive if the business continues the same or a similar activity.

This matters when you raise funding or sell a stake. A founder-owned Abu Dhabi software company with AED 2 million of losses that sells 60% to an investor needs to check whether the business continuity test will be met, or the losses may go. Listed companies are outside this restriction.

Article 38 allows a tax loss to be transferred from one company to another where there is at least 75% common ownership and other conditions are met, including that both are resident and neither is exempt or a qualifying free zone person. The receiving company can use it subject to the same 75% cap.

Within a tax group, which needs 95% ownership, the group is taxed as one person, so one member's losses offset another's profits automatically. Losses a company brought into the group from before joining follow specific rules; take advice before relying on them.

Keep a loss schedule: the year the loss arose, the amount, how much has been used each year, and the ownership position at each year end. Without it, you will be reconstructing the history from old returns when the FTA asks.

HelloBooks prepares the yearly corporate tax computation from your ledger, and you can keep the loss schedule alongside it in the same file. Ask 'how much tax loss do we have left from 2025?' and the AI agent answers from the schedule your accountant maintains. Your accountant confirms the continuity tests and the relief claimed in each return. Firms can ask for a loss tracker built to their template through /book-a-demo.