Abu Dhabi: The UAE’s Ministry of Finance has given the green light for businesses to use losses (from the date of the introduction of corporate tax) incurred to reduce their taxable income in subsequent financial periods.
The ministry has stated that excess tax losses can be carried forward and applied against future taxable income, as long as certain conditions are met.
- With Corporate Tax, UAE businesses still have time to mend wrong transaction entries
- UAE Corporate Tax: Should free zone businesses be thinking to separate 'mainland' operations?
- UAE Corporate Tax: Free zone businesses need to check out 'disqualifying income'
- In 2023, tax auditors fire up UAE's job market, and with '35-50% pay hike' demands
According to the clarification related to the new corporate tax law - set to take effect from the first fiscal year starting on or after June 1, 2023 - tax losses from one company within a group can be used to offset taxable income from another company within the same group, subject to meeting specific requirements. Losses for corporate tax purposes - known as tax losses - will occur when the total deductions that a business is eligible to claim exceed the gross income for the relevant financial period.
The ministry has also highlighted that a group of companies in the UAE can apply to form a tax group and be regarded as a single taxable entity, provided that specific conditions are met. By doing so, the tax group in the country will only be required to file a single tax return on behalf of the entire group.