✅ Understanding 75% Tax Loss Transfer Rule in UAE Corporate Tax: Real Example Included!

As the UAE continues aligning its tax laws with global standards, businesses must understand the strategic implications of corporate tax loss transfers. A particularly valuable tool is the ability to transfer tax losses between group companies under certain conditions. But here's the catch: you can only transfer up to 75% of the recipient company’s taxable income in a given tax period. Sounds technical? Let’s simplify it — and see how it can be applied in real life.

UAE CORPORATE TAX -2025

7/19/20252 min read

📌 When Can UAE Companies Transfer Tax Losses?

According to the UAE Corporate Tax Law, tax losses can be transferred between two resident juridical persons (companies), only if the following five conditions are met:

✅ Key Conditions for Tax Loss Transfer:

Both companies must be UAE-resident juridical persons.
Ownership requirement: One must own 75% or more of the other OR a third party must own 75% or more of both entities. This ownership must exist at the start and end of the tax period when the loss occurred.
Neither entity can be an Exempt Person (like government entities or pension funds).
Neither should be a Qualifying Free Zone Person.
Both companies must have the same financial year and use the same accounting standards.

🚫 Important Limitation:

The maximum loss transferable is limited to 75% of the recipient’s taxable income for that period. Anything above that cannot be transferred.

🧾 Real-Life Example: 75% Loss Transfer & Carry Forward

Let’s break it down with a practical example.

📊 Company A & Company B – Same Group

Company A incurs a tax loss of AED 1,000,000 in FY 2024.
Company B, a group company (meeting all 5 conditions), has a taxable income of AED 800,000 in FY 2024.
A third entity owns 100% of both A and B throughout the year.

💡 What Happens?

Company A can transfer tax loss to Company B only up to 75% of B’s taxable income.
That’s: 75% of AED 800,000 = AED 600,000.

So, AED 600,000 of tax loss is transferred to Company B and offsets its income.
Company B’s revised taxable income = AED 200,000.

🔁 What About the Balance AED 400,000?

The remaining AED 400,000 loss stays with Company A.
Company A can carry forward this unutilized tax loss to offset future taxable profits, subject to the carry-forward provisions under UAE Corporate Tax.

🚀 Why This Matters for Your Business

This 75% tax loss transfer rule is a golden opportunity for group companies to strategically optimize tax liability. However, compliance with all conditions and documentation is crucial.

📌 Final Thoughts

Understanding and leveraging tax loss transfers can provide substantial savings and enhance group-wide tax efficiency. But businesses must maintain clear ownership structures, synchronized accounting, and a compliant approach.

💬 Need help with tax planning or filing in the UAE?
Visit www.camfkhan.com or get in touch with our expert team to ensure your tax strategies are fully aligned with UAE Corporate Tax laws.