UAE Corporate Tax Loss Carry Forward and Group Relief Guide 2026
UAE Corporate Tax allows businesses making losses to carry those losses forward to reduce future taxable income. UAE CT also allows for Tax Group (consolidated) filing and group relief between UAE entities. This guide covers UAE CT loss carry forward and group relief for 2026.
In this guide:
UAE CT Tax Loss Carry Forward
- Rule: if a UAE company has a tax loss in a period (allowable expenses exceed taxable revenue), that loss can be carried forward to reduce taxable income in future periods
- Carry forward period: indefinite (no time limit under current UAE CT rules); losses can be carried forward until fully utilised
- 75% rule: in any given tax period, carried-forward losses can reduce taxable income by a maximum of 75%; the remaining 25% is taxable (ensures the UAE always receives some CT once a company is profitable again)
- Example: Year 1 loss AED 200,000; Year 2 profit AED 300,000; can offset AED 200,000 against Year 2 profit BUT maximum 75% of AED 300,000 = AED 225,000; full AED 200,000 can be used; CT on AED 100,000 (AED 300,000 – AED 200,000)
Conditions for Using UAE CT Tax Losses
- Continuity of business: the company claiming the loss must have continued the same business; if business activities materially changed (e.g. ceased trading and started completely different activity), losses may not be available
- Ownership continuity: if ownership changes significantly (>50% change in ownership), the carried-forward losses may not be available to the new owners; prevents loss trafficking
- QFZP losses: losses from qualifying activities of a free zone QFZP company offset against qualifying income only; cannot use QFZP losses to reduce mainland UAE income
UAE CT Tax Group (Consolidated Return)
- What is a Tax Group: two or more UAE resident companies that are 95%+ owned by the same UAE parent; they can file a single consolidated UAE CT return instead of separate returns
- Benefits: profits of one group company can offset losses of another in the same period; reduces CT liability for the group as a whole
- Application: apply to join a Tax Group via EmaraTax; all group members must have same financial year end
- Tax Group restrictions: free zone companies cannot join a Tax Group with mainland companies (different tax regimes); QFZP and non-QFZP free zone companies can be in the same group subject to specific rules
UAE CT Group Relief vs Tax Group
- Tax Group (consolidated): pool all income and losses; file one return; most efficient for groups where some companies are profitable and others are loss-making
- Group Relief (transfer): a UAE company can transfer its loss to a related UAE company (75%+ common ownership) outside of a formal Tax Group; useful for companies that don’t want full consolidation but want to share losses
- Key difference: Tax Group is permanent consolidation; Group Relief is loss transfer per period; choose based on corporate structure and planning needs