Can tax losses be carried back?

Article 37 – Tax Loss Relief 1. A Tax Loss can be offset against the Taxable Income of subsequent Tax Periods to arrive at the Taxable Income for those subsequent Tax Periods. 2. The amount of Tax Loss used to reduce the Taxable Income for any subsequent Tax Period cannot exceed 75% (seventy-five percent) or any other percentage as specified in a decision issued by the Cabinet at the suggestion of the Minister of the Taxable Income for that Tax Period before any Tax Loss relief, except in circumstances that may be prescribed in a decision issued by the Cabinet at the suggestion of the Minister. 3. A Taxable Person cannot claim Tax Loss relief for: a. Losses incurred before the date of commencement of Corporate Tax. b. Losses incurred before a Person becomes a Taxable Person under this DecreeLaw. c. Losses incurred from an asset or activity the income of which is exempt, or otherwise not taken into account under this Decree-Law. 4. A Tax Loss carried forward to a subsequent Tax Period must be set off against the Taxable Income of that subsequent Tax Period, before any remainder can be carried forward to a further subsequent Tax Period, or any Tax Loss transferred under Article 38 of this Decree-Law can be utilised.

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

Article 4 – Tax Loss Relief 1. Where an election to apply the Small Business Relief is made in a Tax Period, any Tax Losses incurred in such Tax Period cannot be carried forward to any subsequent Tax Periods. 2. Any unutilised Tax Losses incurred in previous Tax Periods where an election to apply the Small Business Relief was not made, may be carried forward to subsequent Tax Periods in which an election to apply the Small Business Relief is not made, subject to the conditions of Article 37 of the Corporate Tax Law.

5 How does relief for carried forward Tax Losses work? When a Tax Loss related to a Tax Period cannot be used in full in that Tax Period, the balance remains available to offset in future Tax Periods. A Taxable Person can carry forward its own Tax Losses indefinitely into future Tax Periods. Offsetting Tax Losses can reduce the amount of Taxable Income and thus Corporate Tax payable when a Taxable Person generates Taxable Income in future Tax Periods. The total amount of Tax Losses which can be offset in a subsequent Tax Period is limited to 75% of the Taxable Income in that Tax Period before 2 any Tax Loss relief. The oldest Tax Losses are offset before more recent Tax Losses. A Taxable Person is required to offset carried forward Tax Losses to the fullest extent possible before any remainder can be carried forward to further subsequent Tax Periods.3 For example, if a company has AED 1,000,000 of Taxable Income (before Tax Loss relief) in a Tax Period and Tax Losses of AED 3,000,000 carried forward from earlier Tax Periods, it must offset AED 750,000 of those Tax Losses against its Taxable Income for the Tax Period (i.e., 75% of 1,000,000). This would result in Taxable Income of AED 250,000 (AED 1,000,000 less AED 750,000) for the relevant Tax Period and Tax Losses carried forward to the following Tax Periods of AED 2,250,000 (AED 3,000,000 less AED 750,000). It is not possible to choose to offset a lower amount than 75% of Taxable Income and thereby carry forward more Tax Losses to future Tax Periods. Further, a Taxable Person must first utilise its own carried forward Tax Losses before utilising transferred Tax Losses received from another 4 Taxable Person. A Taxable Person must first fully utilise its own carried forward Tax Losses before transferring any remaining Tax Losses to another Taxable Person for a specific Tax Period. 2 3 4 Article 37(2) of the Corporate Tax Law. Article 37(4) of the Corporate Tax Law. Article 37(4) of the Corporate Tax Law.