Khaleej Times, 4 November 2024: UAE companies must meet certain conditions to claim tax losses.

Tax losses can be carried forward without limitation provided the same person or persons continue to own at least 50% of the entity with the losses.

If there is a greater than 50% change in ownership, tax losses may still be carried forward provided there is no major change in the nature or conduct of the entity’s business.

Tax losses from one UAE group company may be used to offset the taxable income of another UAE group company where there is 75% or more common ownership and certain other conditions are met.

These conditions include both companies being UAE resident juridical persons, neither being an exempt person or a qualifying free zone business, and their financial statements being prepared using the same accounting standards and financial year.

Tax losses can, subject to certain conditions, be offset against the taxable income of future periods, up to a maximum of 75% of the taxable income in each of those future periods.

Any excess (unused) tax losses can be carried forward and used against taxable income of future tax periods indefinitely.

Example: A taxpayer has a taxable income of Dh360,000 and carried forward losses of Dh300,000.

It can offset (75% x Dh360,000) = Dh270,000 of its losses carried forward in the relevant tax period, reducing its taxable income to Dh90,000.

The amount of tax losses available for carry forward to subsequent tax periods would reduce to Dh30,000 (Dh300,000-Dh270,000).

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