TABLE OF CONTENTS
Profit is the primary goal of any business. Whether a startup or a behemoth, the ultimate goal is to maximize shareholder wealth.
But, then it is not always possible to generate a profit. Losses are unavoidable, especially in the early years of operations. Even companies that have been around for decades might lose money at times.
Companies must pay corporate taxes on taxable income. In the years they make profits.
How are losses handled?
Is it possible to carry over the losses to future years?
How long will it be?
What are the requirements?
These are the questions that every investor should ask and have answers to
So, let us find out!
Yes, the proposed UAE CT regime allows the carry forward of losses incurred. Such losses can be adjusted against its future profits.
Subject to conditions.
Obviously, No. There were no taxes on business income earlier. As a result, Losses pertaining to financial years prior to the introduction of the CT regime will not be allowed to be carried forward.
For the purposes of the CT, the first financial year begins on or after June 1, 2023. Any losses suffered by a company after the CT regime went into effect would be carried forward.
There are no limits as such. All the losses incurred can be carried over.
Losses can be carried forward indefinitely.
However, in any given year, the amount of set-off allowed is limited to a maximum of 75 percent of taxable income
This means that even if all accumulated losses are not entirely offset, the business must pay taxes on 25% of its taxable income.
To demonstrate, consider the following scenario:
Forming a tax group can be beneficial to a certain extent. This question is more fully answered here.
Following losses are not eligible to carry forward to subsequent years:
Carry forward of business losses allowed under the following conditions:
Losses are something that no company wants to experience. When things go wrong, though, losses are unavoidable. Losses may occur more frequently than expected.
A business would hope, at the very least, to be able to carry forward losses to the following year. To lower the tax payment in profitable years.
The UAE CT regime would allow taxable losses to be carried forward and set off. For an indefinite period. With conditions.
Have a say in how the UAE Corporate Tax laws should be - submit your comments and learn more about the new CT Law.
All the answers on Tax loss carry forward under the new Corporate Tax Law.
Calculating your tax liability under the Corporate Tax Law
Are companies in UAE Free Zones subject to Corporate taxes?
The Corporate Tax Law is a Federal Law that will apply to all businesses and commercial activities(legal entities)in the UAE. Find out more.