Are losses lost when company ownership changes?

Article 39 – Limitation on Tax Losses Carried Forward 1. Tax Losses can only be carried forward and utilised in accordance with the provision of Clause 2 of Article 37 of this Decree-Law provided that: a. From the beginning of the Tax Period in which the Tax Loss is incurred to the end of the Tax Period in which the Tax Loss or part thereof is offset against Taxable Income of that period, the same Person or Persons continuously owned at least a 50% (fifty percent) ownership interest in the Taxable Person. b. The Taxable Person continued to conduct the same or a similar Business or Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 45 Business Activity following a change in ownership of more than 50% (fifty percent). 2. For the purposes of paragraph (b) of Clause 1 of this Article, relevant factors for determining whether a Taxable Person has continued to conduct the same or a similar Business or Business Activity following a change in the direct or indirect ownership include: a. the Taxable Person uses some or all of the same assets as before the ownership change; b. the Taxable Person has not made significant changes to the core identity or operations of its Business since the ownership change; and c. where there have been any changes, these result from the development or exploitation of assets, services, processes, products or methods that existed before the ownership change. 3. Clause 1 of this Article shall not apply to a Taxable Person whose shares are listed on a Recognised Stock Exchange. Chapter Twelve – Tax Group Provisions

6 What are the limitations on the carry forward of Tax Losses? The carry forward and utilisation of Tax Losses can be restricted in case of a change of ownership of more than 50% in a Taxable Person. Such change occurs when more than 50% of the ownership interests in a Taxable Person have changed comparing the beginning of the Tax Period in which a Tax Loss arose and the end of the Tax Period when 5 the Tax Loss is fully or partially utilised . An ownership interest is any equity or similar interest (for instance, a partnership interest or shares issued by a company) that carries rights to profits and liquidation proceeds. For instance, if the shareholders of a company consist of 5 individuals that each hold 20% of the shares, there would be a change of ownership if 3 of those individuals disposed of all of their shares at the same time. Further, for the purposes of this condition, the ownership interests include direct or indirect ownership interests. In the case of a change in ownership of more than 50%, a Tax Loss can only be carried forward and offset against Taxable Income of future Tax Periods if the Taxable Person continues to conduct the same or a similar Business or Business Activity.6This requires the nature of the activities to remain substantially unchanged. When evaluating whether a Taxable Person has continued to conduct the same or a similar Business or Business Activity after a change in the direct or indirect ownership, consideration should be given to the following factors (non-exhaustive)7 : • the Taxable Person uses some or all of the same assets as before the ownership change; • the Taxable Person has not made significant changes to the core identity or operations of its Business since the ownership change; • where there have been any changes, these result from the development or exploitation of assets, services, processes, products or methods that existed before the ownership change. The above limitation of carry forward of Tax Losses does not apply to a Taxable Person whose shares are listed on a Recognised Stock Exchange8. 5 6 7 8 Article 39(1)(a) of the Corporate Tax Law. Article 39(1)(b) of the Corporate Tax Law. Article 39(2) of the Corporate Tax Law. Article 39(3) of the Corporate Tax Law.

The remaining Tax Loss will be carried forward to 2026 by Company O, illustrated as follows (amounts in AED): 2025: Details of Tax Loss Tax Loss brought forward from 2024 Less: Tax Loss utilised in 2025 by Company O Less: Tax Loss transferred to Company P Less: Tax Loss transferred to Company Q Tax Loss carried forward to 2026 Company O 28,750,000 (7,500,000) (3,000,000) (6,000,000) 12,250,000 9.3.2. Limitation on Tax Loss carried forward As noted in Section 4.8.2, a Tax Loss can be carried forward by a Taxable Person provided the owners of the Taxable Person continuously hold at least 50% ownership from the start of the period in which the Tax Loss is incurred, to the end of the Tax Period in which the Tax Loss is used to offset against Taxable Income, or the same or similar Business is carried on following the change in ownership.169 In the 2026 Tax Period, the owners of Company O cease to hold at least 50% ownership interest. Additionally, there is also a change in the Business of Company O. Since Company O fails to meet the required conditions discussed above, it cannot utilise, transfer or carry forward the remaining Tax Loss of AED 12,250,000 and so it will be forfeited. 169 Article 39 of the Corporate Tax Law. Corporate Tax Guide | Determination of Taxable Income | CTGDTI1 84