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Tax loss relief

Applies
FY2024 onwards
Reviewed
Rule
UAE-CT-LOSS-2024.1
By

How much taxable income can UAE tax losses offset?

Up to 75% of a later period's taxable income before loss relief. Losses from before Corporate Tax applied cannot be used.

Per Federal Decree-Law No. 47 of 2022, Article 37, Tax Loss Relief

A Tax Loss can be offset against the Taxable Income of subsequent Tax Periods. The amount used in any subsequent period cannot exceed a published proportion of the Taxable Income for that period before any Tax Loss relief, except in circumstances the Cabinet may prescribe. Relief cannot be claimed for losses incurred before Corporate Tax commenced, losses incurred before the Person became a Taxable Person, or losses from an asset or activity whose income is exempt or otherwise not taken into account.

Head (f) of Article 20(2). The output is the relief given in the period, the Taxable Income after relief, and the loss remaining. Article 37(4) also fixes the order of use: a loss carried forward must be set off before any remainder is carried further, and before any loss transferred under Article 38 is utilised.

The cap, the exclusions and the order

37(1)–(2) — the offset and its ceiling

  • A Tax Loss offsets the Taxable Income of subsequent Tax Periods, to arrive at the Taxable Income for those periods
  • The amount used cannot exceed a published proportion of the Taxable Income for that period BEFORE any Tax Loss relief
  • The Cabinet may specify another percentage, and may prescribe circumstances in which the ceiling does not apply

37(3) — losses for which relief cannot be claimed at all

Not a smaller relief. No relief — so no ceiling is computed against them.

  • (a) Losses incurred before the date of commencement of Corporate Tax
  • (b) Losses incurred before a Person becomes a Taxable Person
  • (c) Losses incurred from an asset or activity the income of which is exempt, or otherwise not taken into account

37(4) — the order of use

A Tax Loss carried forward to a subsequent period must be set off against the Taxable Income of that period before any remainder is carried to a further period, and before any Tax Loss transferred under Article 38 is utilised. The order is not a preference; it decides which loss is consumed first and therefore what survives.

Order of testing

  1. 1

    Inputs requiring your determination

    Any input a person must decide and has not decided stops the computation. An undecided input is never read as a no.

  2. 2

    Losses for which relief cannot be claimed

    Article 37(3), tested first. The loss is outside relief entirely, so no ceiling is computed against it.

  3. 3

    Taxable Income before Tax Loss relief

    There must be Taxable Income to offset against. Where there is none, no relief is given in the period and the loss is not used — a proportion of a loss-making period is not an allowance, and reporting one would suggest relief had been partly given.

  4. 4

    Cap on Tax Loss relief

    The published proportion of the Taxable Income before relief is the ceiling. Where the available loss exceeds it, the ceiling binds and the balance remains.

  5. 5

    Tax Loss within the cap

    Where the available loss is within the ceiling, the whole loss is used.

Examples

Illustrative scenarios — ours, not the authority’s — each computed live by this rule. Change any fact and the outcome is the rule’s, not a hand-written answer.

Brought-forward loss larger than the ceiling

A company with Taxable Income of AED 10,000,000 before relief and AED 9,000,000 of brought-forward Tax Loss.

Computed

Tax Loss relief of AED 7,500,000 as computed for FY2026: 75% of Taxable Income of AED 10,000,000 before relief gives a ceiling of AED 7,500,000, and the loss available is AED 9,000,000, so the ceiling binds. Taxable Income after relief is AED 2,500,000 and AED 1,500,000 of loss remains, based on the figures you supplied. Article 37(4) requires a carried-forward loss to be used before any loss transferred under Article 38.

Workings

Taxable Income before Tax Loss reliefArticle 37(2) — the cap is a proportion of this figure, not of the income after relief
AED 10,000,000
Proportion appliedArticle 37(2) — published value for FY2026
75%
Ceiling on relief for the periodArticle 37(2)
AED 7,500,000
Tax Loss availableas supplied
AED 9,000,000
Relief given in the periodArticle 37(2) — limited to the ceiling
AED 7,500,000
Taxable Income after Tax Loss reliefArticle 37(1)
AED 2,500,000
Tax Loss remainingcarried forward subject to Articles 37(4) and 39
AED 1,500,000

Decided by the cap on tax loss relief

Brought-forward loss within the ceiling

The same company with only AED 2,000,000 of brought-forward loss, which the ceiling does not reach.

Computed

Tax Loss relief of AED 2,000,000 as computed for FY2026: 75% of Taxable Income of AED 10,000,000 before relief gives a ceiling of AED 7,500,000, and the loss available is AED 2,000,000, so the whole loss is used. Taxable Income after relief is AED 8,000,000 and AED 0 of loss remains, based on the figures you supplied. Article 37(4) requires a carried-forward loss to be used before any loss transferred under Article 38.

Workings

Taxable Income before Tax Loss reliefArticle 37(2) — the cap is a proportion of this figure, not of the income after relief
AED 10,000,000
Proportion appliedArticle 37(2) — published value for FY2026
75%
Ceiling on relief for the periodArticle 37(2)
AED 7,500,000
Tax Loss availableas supplied
AED 2,000,000
Relief given in the periodthe whole available loss, within the ceiling
AED 2,000,000
Taxable Income after Tax Loss reliefArticle 37(1)
AED 8,000,000
Tax Loss remainingcarried forward subject to Articles 37(4) and 39
AED 0

Decided by the tax loss within the cap

A loss-making period

A period with no Taxable Income to offset against, and AED 4,000,000 of loss available.

Computed

No Tax Loss relief in this period as computed: Article 37 offsets a Tax Loss against the Taxable Income of a subsequent period, and the Taxable Income before relief is (AED 1,500,000). The loss of AED 4,000,000 is not used, and whether it carries forward is decided by Articles 37(4) and 39.

Workings

Taxable Income before Tax Loss reliefArticle 37(2) — as supplied
(AED 1,500,000)
Tax Loss availableas supplied
AED 4,000,000
Relief given in the periodnil — no Taxable Income to offset against
AED 0

Decided by the taxable income before tax loss relief

A loss from an exempt activity

AED 3,000,000 of loss arising on an activity whose income is exempt, which Article 37(3)(c) excludes from relief.

Computed

No Tax Loss relief for the loss of AED 3,000,000 as computed: Article 37(3)(c) — a loss from an asset or activity the income of which is exempt, or otherwise not taken into account. Article 37(3) excludes it from relief entirely, so no cap is computed against it.

Workings

Tax Lossas supplied
AED 3,000,000
Relief availableArticle 37(3)(c) — a loss from an asset or activity the income of which is exempt, or otherwise not taken into account
AED 0

Decided by the losses for which relief cannot be claimed

Try it

Supply the facts and this rule computes the outcome in your browser, live. Leave a determination undecided and it blocks the result — it is never read as a no.

Not computed yet

3 inputs still need your determination:

  • Does the loss fall within any of the Article 37(3) categories for which Tax Loss relief cannot be claimed?
  • What is the Taxable Income for the period, before any Tax Loss relief?
  • What Tax Loss is available to offset in this period?

Computed in your browser from the figures you supply. Nothing is sent anywhere, and the result is a computation against a rule — reference, not tax advice.

Thresholds

uae.tax_loss_offset_cap_percentage
75% · reviewed 2026-09-28 · source

Threshold values are published separately from the rule and carried with a citation. Where none has been published for the period being computed, the rule reports that rather than applying a default.

Sources

Share this rule

Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader