Carry Forward & Offset of Losses
[Based on the Public Consultation Document released by the Ministry of Finance, UAE on 28 April 2022.]
A business will be able to carry forward loss incurred in one period to offset against the taxable income of future periods.
Offset limit:
Loss incurred in one period can be offset against income in the future period, up to a maximum of 75% of the taxable income in each future tax period.
Time limit:
Tax losses can be carried forward indefinitely if:-
- The same shareholder(s) hold at least 50% of the share capital from the start of the period of loss to the end of the period in which a loss is offset; or
- the same or similar business is carried on by the new owners.
The continuity of shareholder or business requirements does not apply to businesses that are listed on a recognized stock exchange.
Following losses will not be allowed to be carried forward and offset against future income:
- Losses incurred before the effective date of Corporate Tax;
- Losses incurred before a person becomes a taxpayer for UAE Corporate Tax purposes;
- Losses incurred from activities or assets which generate income that is exempt from UAE Corporate Tax;
- Losses incurred by a Free Zone Person that is not attributable to a PE in the
Our comments:
For losses to be carried forward and offset against income in the future years, continuity of shareholder or business is an essential condition. Accordingly, in case of businesses are planning any restructuring/transfer in the Corporate Tax regime due to heavy loss, they will have to keep in mind the loss offset conditions.
