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Transfer of tax losses

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

Can UAE tax losses be transferred within a group?

Yes, between resident companies with 75% common ownership throughout, neither exempt or a QFZP, sharing a year end and accounting standards.

Per Federal Decree-Law No. 47 of 2022, Article 38, Transfer of Tax Loss

A Tax Loss, or a portion of it, may be offset against the Taxable Income of another Taxable Person where all of the Article 38(1) conditions are met: both are juridical persons, both are Resident Persons, one holds at least the published minimum ownership interest in the other or a third Person holds it in each, that common ownership persists from the start of the period the loss was incurred in to the end of the period it is offset in, neither is an Exempt Person, neither is a Qualifying Free Zone Person, their Financial Years end on the same date, and both use the same accounting standards. The transferee reduces its Taxable Income, the total offset stays within the Article 37(2) ceiling, and the transferor reduces its own available Tax Losses by the amount transferred.

Group loss relief without a Tax Group. Article 37(4) places it last in the order of use: a carried-forward loss of the transferee is set off first, so a transferred loss competes with it for the same ceiling and reaches only the headroom left.

The eight conditions, and what follows

All eight are required. Two of them are about time and sameness rather than ownership, and those are the ones most often assumed.

38(1) — every one of these must be met

  • (a) Both Taxable Persons are juridical persons
  • (b) Both Taxable Persons are Resident Persons
  • (c) Either Person has a direct or indirect ownership interest of at least the published minimum in the other, or a third Person has that interest in each of them
  • (d) That common ownership exists from the start of the Tax Period in which the Tax Loss is incurred to the end of the Tax Period in which the other Person offsets it
  • (e) Neither Person is an Exempt Person
  • (f) Neither Person is a Qualifying Free Zone Person
  • (g) The Financial Year of each Person ends on the same date
  • (h) Both Persons prepare their financial statements using the same accounting standards

Condition (d) is continuity, not a snapshot

The ownership must persist across both periods — the one the loss arose in and the one it is used in. A group that met the test on neither of those dates but does today does not meet it.

Conditions (g) and (h) are bookkeeping facts that defeat perfect groups

A common year end and common accounting standards have nothing to do with the strength of the ownership relationship, and either can stop a transfer between wholly owned companies.

38(2) — what follows from a transfer

  • (a) The Person the loss is transferred to reduces its Taxable Income for the relevant Tax Period
  • (b) The total Tax Loss offset shall not exceed the amount allowed under Article 37(2)
  • (c) The transferor reduces its available Tax Losses by the amount transferred for that period

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

    Each condition of Article 38(1), in the article's order

    The first condition not met is reported and no further condition is tested — all eight are required, so the useful answer is which one failed, not how many did.

  3. 3

    Ceiling on the total Tax Loss offset

    Article 38(2)(b) caps the total offset by reference to Article 37(2). The same published proportion is resolved, applied to the transferee's Taxable Income before relief, and reduced by any relief already taken on that Person's own losses.

  4. 4

    Every condition of Article 38(1)

    Where all eight are met and the ceiling has headroom for the whole amount, the loss transfers in full.

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.

Wholly owned sister companies, ample headroom

Two UAE companies wholly owned by the same parent throughout, same year end, same standards, neither exempt nor in a free zone. One transfers AED 3,000,000 of loss to the other, which has Taxable Income of AED 12,000,000 and has taken no relief of its own.

Computed

Every condition of Article 38(1) is met as computed, and AED 3,000,000 of the AED 3,000,000 proposed may be offset against the other Person's Taxable Income for FY2026, within the Article 37(2) ceiling of AED 9,000,000. Article 38(2)(c) requires the transferor to reduce its own available Tax Losses by that amount. Based on the figures you supplied.

Workings

Common ownership interestArticle 38(1)(c) — against a published minimum of 75%
100%
Transferee Taxable Income before Tax Loss reliefArticle 38(2)(a) — as supplied
AED 12,000,000
Proportion appliedArticle 38(2)(b), by reference to Article 37(2) — published value for FY2026
75%
Ceiling on total Tax Loss offsetArticle 37(2)
AED 9,000,000
Relief already taken on the transferee's own lossesArticle 37(4) — used before a transferred loss
AED 0
Headroom remaining under the ceilingArticle 38(2)(b)
AED 9,000,000
Tax Loss proposed for transferas supplied
AED 3,000,000
Tax Loss transferablethe whole amount, within the ceiling
AED 3,000,000
Transferee Taxable Income after the transferred lossArticle 38(2)(a)
AED 9,000,000
Reduction in the transferor's available Tax LossesArticle 38(2)(c) — the transferor reduces its own losses by the amount transferred
AED 3,000,000

Decided by the every condition of article 38(1)

The transferee has already used its own brought-forward loss

The same pair, but the transferee has already taken AED 8,000,000 of relief on its own losses, which Article 37(4) requires it to use first. The transferred loss reaches only the headroom left under the ceiling.

Computed

Every condition of Article 38(1) is met as computed, and AED 1,000,000 of the AED 3,000,000 proposed may be offset against the other Person's Taxable Income for FY2026, the balance being limited by the Article 37(2) ceiling of AED 9,000,000 less the AED 8,000,000 of relief already taken on that Person's own losses. Article 38(2)(c) requires the transferor to reduce its own available Tax Losses by that amount. Based on the figures you supplied.

Workings

Common ownership interestArticle 38(1)(c) — against a published minimum of 75%
100%
Transferee Taxable Income before Tax Loss reliefArticle 38(2)(a) — as supplied
AED 12,000,000
Proportion appliedArticle 38(2)(b), by reference to Article 37(2) — published value for FY2026
75%
Ceiling on total Tax Loss offsetArticle 37(2)
AED 9,000,000
Relief already taken on the transferee's own lossesArticle 37(4) — used before a transferred loss
(AED 8,000,000)
Headroom remaining under the ceilingArticle 38(2)(b)
AED 1,000,000
Tax Loss proposed for transferas supplied
AED 3,000,000
Tax Loss transferableArticle 38(2)(b) — limited by the ceiling
AED 1,000,000
Transferee Taxable Income after the transferred lossArticle 38(2)(a)
AED 3,000,000
Reduction in the transferor's available Tax LossesArticle 38(2)(c) — the transferor reduces its own losses by the amount transferred
AED 1,000,000

Decided by the ceiling on the total tax loss offset

Ownership below the published minimum

The same facts, but the common ownership interest is only 60%.

Computed

The transfer is not available as computed: Article 38(1)(c) requires that the common ownership interest meets the published minimum, and that condition is not met on the facts you supplied. Article 38(1) requires all eight of its conditions, so no further condition is reported. The interest held is 60% against a published minimum of 75% for FY2026.

Workings

Tax Loss proposed for transferas supplied
AED 3,000,000
Tax Loss transferablenil — condition 38(1)(c) is not met
AED 0

Decided by the condition 38(1)(c)

Wholly owned, but with different year ends

A perfect ownership relationship defeated by a bookkeeping fact: the two companies close their Financial Years on different dates.

Computed

The transfer is not available as computed: Article 38(1)(g) requires that the Financial Year of each Person ends on the same date, and that condition is not met on the facts you supplied. Article 38(1) requires all eight of its conditions, so no further condition is reported.

Workings

Tax Loss proposed for transferas supplied
AED 3,000,000
Tax Loss transferablenil — condition 38(1)(g) is not met
AED 0

Decided by the condition 38(1)(g)

One of them is a Qualifying Free Zone Person

The same group, where the loss-making company is a Qualifying Free Zone Person — which condition (f) excludes outright.

Computed

The transfer is not available as computed: Article 38(1)(f) requires that neither Person is a Qualifying Free Zone Person, and that condition is not met on the facts you supplied. Article 38(1) requires all eight of its conditions, so no further condition is reported.

Workings

Tax Loss proposed for transferas supplied
AED 3,000,000
Tax Loss transferablenil — condition 38(1)(f) is not met
AED 0

Decided by the condition 38(1)(f)

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

11 inputs still need your determination:

  • Both Taxable Persons are juridical persons?
  • Both Taxable Persons are Resident Persons?
  • What direct or indirect ownership interest does one Person hold in the other, or a third Person hold in each of them?
  • That common ownership existed from the start of the period the loss was incurred in to the end of the period the other Person offsets it in?
  • Neither Person is an Exempt Person?
  • Neither Person is a Qualifying Free Zone Person?
  • The Financial Year of each Person ends on the same date?
  • Both Persons prepare their financial statements using the same accounting standards?
  • What Tax Loss, or portion of it, is to be transferred?
  • What is the Taxable Income of the Person the loss is transferred to, for the relevant period, before any Tax Loss relief?
  • How much of its own carried-forward Tax Losses does the transferee offset in the period? Article 37(4) requires those to be used first, to the fullest extent the cap allows — nil only if it has none.

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.loss_transfer_min_ownership
75% · reviewed 2026-09-28 · source
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

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Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader