When it comes to corporate tax, relief provisions can be real game changers—especially for businesses navigating losses, internal restructuring, or group-level adjustments. In this blog, we’re breaking down two major reliefs available under UAE’s corporate tax framework:
- Tax loss relief — for when your business hits a rough patch
- Group relief — for when you’re transferring assets between group entities
We’ll unpack how these work, when they apply, and what limitations you need to watch out for. Let’s get right into it.
Preface
As part of the UAE’s ongoing roll-out of its corporate tax framework, this alert zooms in on the reliefs that can ease a taxpayer’s burden under specific conditions. Two major ones are:
- Tax loss relief, where you can carry forward business losses to offset against future profits.
- Group relief, which allows asset and liability transfers between certain group companies without triggering a tax event.
Understanding these provisions isn’t just about reducing your tax bill—it’s also about planning smartly and avoiding compliance mistakes. So let’s take them one at a time.
Tax Loss Relief
If your business ends up in the red for a particular tax period, all is not lost. The UAE allows you to carry forward those losses and use them to reduce your taxable income in future years—subject to a cap.
Here’s how it works:
- You can set off losses against up to 75% of your taxable income in a later year.
- If some loss remains after applying this cap, it can be carried forward indefinitely—there’s no expiry date.
However, not all losses qualify. You cannot claim tax loss relief for:
- Losses from before corporate tax was implemented in the UAE
- Losses from before the business became a taxable entity
- Losses tied to activities or income that are exempt under UAE corporate tax law
So before you start calculating offsets, check the timeline and source of the loss.
Let’s walk through a simplified example. Assume a UAE-based individual operates a business alongside personal investments, and the financial years run from June to May.
Here are the numbers (all in AED):
| Financial Year | Business Result | Investment Income | Total Result |
| 2022–23 | (2,000,000) | 500,000 | (1,500,000) |
| 2023–24 | (1,500,000) | (200,000) | (1,700,000) |
| 2024–25 | 1,900,000 | 100,000 | 2,000,000 |
| 2025–26 | 300,000 | 50,000 | 350,000 |
Let’s focus on 2024–25, the first full year under UAE corporate tax:
- Losses from 2022–23 don’t count—they occurred before tax was introduced.
- The AED 200,000 loss from investments in 2023–24 also doesn’t count—personal investments are not subject to corporate tax.
What can be used?
Only the AED 1,500,000 loss from business operations in 2023–24.
Now apply the 75% rule:
- 75% of the taxable income in 2024–25 (AED 1.9 million) = AED 1,425,000
That’s the maximum relief you can use this year.
The remaining AED 75,000 is carried forward to the next year.
In the following year (2025–26), the taxable income is AED 300,000.
- 75% of that is AED 225,000
- Remaining loss to carry forward: AED 75,000
So the entire leftover loss can be fully applied in this year.
One crucial point:
Set-off is mandatory. You cannot choose to delay it—even if applying it means your taxable income falls below the basic exemption limit of AED 375,000. The law clearly mandates that relief must be applied in the earliest eligible year.
Transfer of Tax Losses
In some cases, businesses can even transfer tax losses from one entity to another. This isn’t a blanket rule—it only works when certain ownership and operational conditions are met.
Here’s what’s required:
- Both entities must be UAE resident judicial persons
- One must own at least 75% of the other directly or indirectly, or a third party must hold 75% in both
- This ownership link must exist continuously from the year losses were incurred to the year they’re set off
- Neither entity can be exempt or a qualifying free zone person
- Both must have the same financial year and follow the same accounting standards
Also, the 75% cap still applies, even after transferring the losses.
Once transferred, the entity giving up the loss must reduce that amount from its own records.
Keep in mind: this is not the same as forming a tax group—those rules are separate and covered in another alert.
Limitations on Carry Forward of Tax Losses
There’s a catch with carrying losses forward—you must maintain a degree of ownership continuity.
Here’s the rule:
- At least 50% ownership must remain the same between when the loss occurred and when it’s set off.
- If that threshold is breached, you can still carry forward the loss, but only if the same or similar business activities continue.
To determine this, the tax authority will look at:
- Whether the business is still using the same core assets
- Whether there have been significant operational changes
- Whether those changes were the result of normal business development or a complete business shift
There’s one big exception:
If the company is publicly listed on a recognized stock exchange—even outside the UAE—then these limitations don’t apply.
Group Relief
Now let’s move to Group Relief, which is all about tax-neutral transfers between companies that are part of a qualifying group.
Here are the base conditions:
- Both companies must be UAE residents, or at least have a permanent establishment in the UAE
- One must hold at least 75% of the other (direct or indirect), or a third party holds 75% in both
- Neither company can be exempt or a qualifying free zone entity
- Both follow the same financial year and use the same accounting standards
If these are met, assets or liabilities can be transferred between them at book value, without triggering a taxable gain or loss.
But the relief isn’t unconditional. These key rules apply:
- The transfer must be done at book value
- The price paid or received must match the net book value
- The asset or liability can’t be sold outside the group within 2 years
- Both parties must stay in the group for at least 2 years
What happens if any of these are violated?
- The original transfer is treated as having happened at market value
- The relief is withdrawn, and the transfer is taxed in the original year
And while that sounds simple, the tax compliance implications—like revised returns or re-computation—are complex and not yet fully detailed in law. So stay cautious when planning group transfers.
Let’s walk through an example.
A company transfers an asset with:
- Book Value = AED 1 million
- Market Value = AED 10 million
Case A: Transfer to a third party
- Group relief doesn’t apply
- If sold at book value, there’s no gain or loss
- But authorities may still review under anti-abuse rules if it seems unusual
Case B: Sold at market value (AED 10M)
- Gain of AED 9M is taxable
Now what if the transfer is to a related company, but they’re not part of a qualifying group?
- Group relief still doesn’t apply
- Transfer pricing rules kick in
- If sale is below market value, the price will be adjusted upward, and the gain becomes taxable
If it’s at market value, then no adjustment is needed—but the gain is still taxable
Only when transfer happens within a qualifying group, and all conditions are met, is it tax-neutral.
If the transaction violates any conditions (like overpricing), relief is denied, and tax applies on the full gain.
Final Thoughts
The UAE’s corporate tax regime isn’t just about what you owe—it’s also about when and how you can reduce your liability, lawfully.
Tax loss relief and group relief are two such tools. Used correctly, they can smooth out tough years and ease internal restructuring. But they come with rules—strict ones. Miss a condition, and you could lose the benefit entirely.
Whether you’re carrying forward losses or moving assets between group entities, the key is always the same: documentation, planning, and alignment with the law.
Get it right, and the reliefs can offer genuine breathing room.
Get it wrong, and you could face unexpected tax charges down the line.
