Answer:
Yes. Taxable persons in the UAE may carry forward tax losses from prior Tax Periods and use them to reduce taxable income in future periods, subject to specific conditions. (Article 37 of Federal Decree-Law No. 47 of 2022)
Utilisation Rules:
- Tax losses can be offset against taxable income of future Tax Periods.
- In any Tax Period, the offset is limited to 75% of the taxable income before applying the tax loss.
- Any unused tax losses can be carried forward indefinitely.
- Losses incurred before the Corporate Tax regime started, or before a person became a Taxable Person, or from exempt income cannot be carried forward.
- Carried forward losses are subject to ownership continuity (at least 50%) and same or similar business conditions under Article 39.
Example:
A company has carried forward tax losses of AED 125,000. In the current Tax Period, it earns taxable income of AED 100,000.
- Maximum allowed offset = 75% × 100,000 = AED 75,000
- Taxable income after offset = 100,000 – 75,000 = AED 25,000
- Remaining losses carried forward = 125,000 – 75,000 = AED 50,000
The remaining...