What are the conditions to transfer tax losses to another group company?

Article 38 – Transfer of Tax Loss 1. A Tax Loss or a portion thereof may be offset against the Taxable Income of another Taxable Person where all of the following conditions are met: a. Both Taxable Persons are juridical persons. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 44 b. Both Taxable Persons are Resident Persons. c. Either Taxable Person has a direct or indirect ownership interest of at least 75% (seventy-five percent) in the other, or a third Person has a direct or indirect ownership interest of at least 75% (seventy-five percent) in each of the Taxable Persons. d. The common ownership under paragraph (c) of Clause 1 of this Article must exist from the start of the Tax Period in which the Tax Loss is incurred to the end of the Tax Period in which the other Taxable Person offsets the Tax Loss transferred against its Taxable Income. e. None of the Persons are an Exempt Person. f. None of the Persons are a Qualifying Free Zone Person. g. The Financial Year of each of the Taxable Persons ends on the same date. h. Both Taxable Persons prepare their financial statements using the same accounting standards. 2. Where a Taxable Person transfers its Tax Loss to another Taxable Person under Clause 1 of this Article: a. the Taxable Person which the Tax Loss is transferred to shall reduce its Taxable Income for the relevant Tax Period; b. the total Tax Loss offset shall not exceed the amount allowed under Clause 2 of Article 37 of this Decree-Law; and c. the Taxable Person shall reduce its available Tax Losses by the amount of the Tax Loss transferred to the other Taxable Person for the relevant Tax Period.

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.

If a Tax Group ceases to exist and the Parent Company continues to be a Taxable Person, any Tax Losses of a Tax Group will become Tax Losses of the Parent Company. 263 If the Parent Company ceases to exist or it ceases to be a Taxable Person, the Tax Losses of the Tax Group will not be available for utilisation except if the Parent Company is replaced where Article 40(12) of the Corporate Tax Law applies. 264 Any pre-Grouping Tax Losses will become Tax Losses of the relevant Subsidiary and will be available for future utilisation, if the Subsidiary continues to exist. Where Article 40(12) of the Corporate Tax Law applies, a Parent Company can be replaced by another Parent Company without discontinuing the Tax Group. In this case, any unutilised Tax Losses of the Tax Group continue to be available as Tax Losses of the Tax Group.265 10.4. Transfer of Tax Losses The Tax Group is treated as a single Taxable Person.266 If the conditions of Article 38 of the Corporate Tax Law are met, the Tax Group can transfer a Tax Loss to another Taxable Person or another Tax Group. Similarly, if another Taxable Person or another Tax Group meets the relevant conditions under Article 38 of the Corporate Tax Law, it can transfer a Tax Loss to the Tax Group. A Tax Loss can be transferred from one Taxable Person to another Taxable Person only upon fulfilment of certain conditions. 267 One of the conditions is that either Taxable Person has a direct or indirect ownership interest of at least 75% in the other, or a third Person has a direct or indirect ownership interest of at least 75% in each of them. 268 As explained in Section 8.3.2, in case of Tax Groups, this condition is determined by aggregating all ownership interests held by members of the Tax Group. If a Tax Loss is transferred to the Tax Group, this can only be utilised after utilisation of any pre-Grouping Tax Losses, restricted Tax Group Tax Losses and other Tax Losses of the Tax Group.269 263 Article 42(7)(a) of the Corporate Tax Law. 264 Article 42(7)(b) and Article 42(8) of the Corporate Tax Law. 265 Article 42(8) of the Corporate Tax Law. 266 Article 40(4) of the Corporate Tax Law. 267 Article 38(1) of the Corporate Tax Law. 268 Article 38(1)(c) of the Corporate Tax Law. 269 Article 37(4) of the Corporate Tax Law. Corporate Tax Guide | Tax Groups | CTGTGR1 85

17.8.3 Amount of Tax Losses claimed Enter the amount of the Tax Loss utilised in relation to the Tax Loss that is received from another Resident Person. You must offset all the pre-Grouping Tax Loss and available Tax Losses of the Tax Group before any transferred Tax Losses can be utilised. 183 The amount of Tax Losses you can claim is limited to 75% of the Taxable Income of the Tax Group, less pre-Grouping Tax Loss utilised in the current Tax Period and any Tax Group Tax Losses utilised in the current Tax Period. If you enter an amount which would result in utilisation of more than the permitted amount of Tax Losses, an error message will appear. 17.9. Tax Losses transferred to other Taxable Persons This part should be completed when a Tax Group transfers Tax Losses to another entity which is a juridical person that is a Resident Person as per the conditions of Article 38 of the Corporate Tax Law. 17.9.1 Amount of Tax Losses available for transfer This is pre-populated from field 17.7.10. Tax Losses can only be transferred to a Taxable Person outside the Tax Group once the Tax Group has utilised them to the fullest extent possible in the Tax Period. 17.9.2 Name of transferring entity Enter the legal name of the claimant entity to which the Tax Group transfers its Tax Loss. If transferring to a Tax Group, enter the name of the Tax Group. 17.9.3 Corporate Tax TRN of transferring entity Enter the TRN of the claimant entity. If this is a Tax Group, enter the TRN of the Tax Group. 17.9.4 Amount of Tax Losses transferred 183 Article 37(4) of the Corporate Tax Law read with Article 7(4) of Ministerial Decision No. 125 of 2023. Corporate Tax Guide | Tax Returns | CTGTXR1 131