TaxSavvyAE

Using last year's tax loss

We had a loss last year and a profit this year. How much of the loss can we use?

The situation

Losses can be carried forward and offset up to 75 percent of taxable income in later periods, provided ownership or business continuity conditions are met.

The law

  • Art 37, Federal Decree-Law 47 of 2022: Loss relief up to 75 percent of taxable income
  • Art 39, Federal Decree-Law 47 of 2022: Ownership change conditions for using losses

What it means for you

Example: loss of AED 500,000 last year and taxable income of AED 600,000 this year. You can offset up to AED 450,000 (75 percent), leaving taxable income of AED 150,000, which is under AED 375,000, so tax is nil. The unused AED 50,000 carries forward. Losses from before Corporate Tax started or from SBR periods are not available.

What to do

  1. Confirm the loss came from a standard Corporate Tax period.
  2. Check ownership did not change by more than half without business continuity.
  3. Apply loss up to 75 percent of taxable income.
  4. Track the balance carried forward.

We can do this for youStandard Corporate Tax return: taxable income computation at 0% and 9%, adjustments, losses and payment: AED 4,750

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