This question came in on WhatsApp on 14 September 2026 from a shipping company's bookkeeper preparing the FY2025 return: "On the first 375,000 dirhams the tax is 0%. Wouldn't it make sense to deduct the 375,000 first, and only then deduct the loss from previous years — which would be just 12,140 instead of 290,355?" It is a sensible instinct and it is wrong, because UAE corporate tax applies the loss before the rate, not after, and does not allow you to choose how much loss to use. Fastlane's corporate tax filing service catches this before the return is submitted; this post explains the rule with the client's own numbers.
The two computations side by side
The computation the client had (not permitted)
- Net profit before CT, FY2025: 387,140
- Less income eligible for 0%: (375,000)
- Taxable above threshold: 12,140
- Loss utilised from FY2024: (12,140)
- Net income at 9%: nil → CT nil
- Loss carried to FY2026: 373,619 − 12,140 = 361,479
The computation the law requires
- Taxable income before loss relief: 387,140
- Loss offset, capped at 75%: 75% × 387,140 = (290,355)
- Taxable income after loss relief: 96,785
- 0% band covers 96,785 → CT nil
- Loss carried to FY2026: 373,619 − 290,355 = 83,264
Both routes produce nil tax for FY2025. The difference is what is left to carry forward: AED 361,479 under the client's version, AED 83,264 under the correct one. The client's version is not a permitted choice; it is an incorrect return.
Why the loss comes before the threshold
The 0% rate in the Corporate Tax Law is applied to Taxable Income, and Taxable Income is a defined term: accounting income, adjusted, after tax loss relief under Article 37. The AED 375,000 band is therefore a rate band applied to the final figure, not an exemption of the first AED 375,000 that you subtract before anything else. Once that order is fixed, the sequence in every return is:
- Taxable income before loss reliefAccounting profit with the Chapter 5 adjustments (non-deductible expenses, exempt income, and so on). In the example, AED 387,140.
- Deduct brought-forward tax losses, capped at 75%Article 37(2): the offset in any period cannot exceed 75% of the taxable income for that period. 75% × 387,140 = AED 290,355. The full brought-forward balance of AED 373,619 was available, so the cap, not the balance, sets the amount.
- Taxable income for the period387,140 − 290,355 = AED 96,785.
- Apply the rates0% on the first AED 375,000 of taxable income, 9% above. AED 96,785 sits entirely in the 0% band, so tax is nil.
- Carry forward the balance373,619 − 290,355 = AED 83,264 available for FY2026, again subject to the 75% cap in that year.
Why you cannot use "just enough"
The client's second argument was that even if the loss comes first, surely the company can choose to use only AED 12,140 of it. The FTA's Corporate Tax Guide on Tax Losses answers this directly: brought-forward tax losses must be utilised to the maximum extent possible in each tax period. The 75% figure is a ceiling on what can be used, not a floor the taxpayer may drop below. A taxable person cannot elect to use a smaller amount in order to bring taxable income down to exactly AED 375,000 and preserve the rest. Where losses are available and taxable income exists, the offset is mandatory up to the cap.
The reasoning behind the client's version is that losses are worth 9% in a future year but 0% this year. That is true in cash terms, and it is exactly why the law removes the choice. Using AED 290,355 in FY2025 against income that would have been taxed at 0% anyway is the cost of the rule; there is no way to defer it.
How the numbers appear in EmaraTax
The return does the arithmetic for you once the taxable income before losses and the loss schedule are entered, which is how the mismatch between the client's sheet and the draft return surfaced.
| EmaraTax field | Section | Value in the example |
|---|---|---|
| Taxable Income / (Tax Loss) before any Tax Loss adjustments | Taxable income | 387,140 |
| Tax Losses brought forward | Tax Losses Schedule | 373,619 |
| Tax Losses incurred during the Tax Period | Tax Losses Schedule | 0 |
| Tax Losses utilised in current Tax Period | Tax Losses Schedule / Tax Losses | 290,355 (auto: 75% × 387,140) |
| Tax Losses carried forward available for transfer | Tax Losses Schedule | 83,264 |
| Taxable Income / (Tax Loss) for the Tax Period | Tax Calculations and Tax Credits | 96,785 |
| Corporate Tax Liability | Tax Calculations and Tax Credits | 0 |
Two things to check on the same screens. First, "Does the Taxable Person wish to claim Tax Losses from, or surrender Tax Losses to, another group entity?" should be No for a standalone company; the group-transfer route is a different relief with its own 75% ownership condition. Second, "Does the Taxable Person wish to use any available Tax Credits?" was ticked Yes on the draft. With no withholding tax or foreign tax credits, that should be No; leaving it on Yes opens a credit schedule that then has to be zeroed and invites a query.
Conditions that can cut the brought-forward loss
The AED 373,619 was available in full because the company met the continuity tests. Losses stop being available, in whole or in part, where:
| Condition | Effect |
|---|---|
| Change of ownership of more than 50% since the loss period, and the business changes to a different or new activity | Losses before the change are lost; EmaraTax has a specific "limited due to change in ownership and change in Business Activity" line |
| Losses arose before the first tax period (pre-1 June 2023 accounting losses) | Not tax losses; cannot be brought forward |
| Losses relate to exempt income or to a period the company was an exempt person or a QFZP's qualifying income | Not available for offset |
| Small Business Relief elected in the loss year | No tax loss arises in an SBR year and none can be carried out of it — see the 2-page return guide |
Losses brought forward and a taxable profit this year? Send the FY2024 return and the FY2025 trial balance on WhatsApp. Fastlane prepares the CT computation and files the EmaraTax return with the loss schedule completed correctly, from AED 249 for a full return.
Enquire nowWhatsApp usA second worked example: when the 75% cap does bite
Suppose FY2026 profit before loss relief is AED 520,000 and the AED 83,264 carries in. The cap is 75% × 520,000 = AED 390,000, which exceeds the balance, so the whole AED 83,264 is used. Taxable income is 520,000 − 83,264 = AED 436,736; tax is 9% × (436,736 − 375,000) = AED 5,556, and nothing carries forward. Had the FY2025 return kept AED 361,479 instead, FY2026 tax would have been nil — which is precisely the outcome the mandatory-utilisation rule prevents. The FY2025 return as filed is the only correct position, and a later attempt to "recover" the loss by amending would be a voluntary disclosure of an incorrect return, not a permitted change of method.
What to keep on file
The FTA can ask for the loss reconciliation for as long as the losses are being used. Keep a one-page schedule per year showing the brought-forward balance, the 75% computation, the amount utilised, and the closing balance, and make sure it agrees to the Tax Losses Schedule in EmaraTax. The client's note — "Brought forward AED 373,619; utilised AED 12,140; carried AED 361,479" — is the kind of document that becomes a problem in an audit precisely because it was written down. The corrected note reads: brought forward 373,619; utilised 290,355; carried forward 83,264.
Related guides
How the tax period is set when the financial year is not the calendar year: non-calendar financial years. When a loss company closes: CT deregistration process and penalties. Every CT return Fastlane files, including the loss schedule, is described on the corporate tax filing service page.
We do not charge for answering the question. We charge for filing it right.
Fastlane's FTA-registered tax agents prepare the computation, complete the EmaraTax loss schedule and file the return — from AED 249. If you have already filed with the wrong loss figure, ask us about a voluntary disclosure before the FTA asks you.
Corporate tax filing serviceWhatsApp usFrequently asked questions
Does the AED 375,000 0% threshold apply before or after tax loss relief?
After. The 0% rate applies to Taxable Income, and Taxable Income is the figure after brought-forward tax losses have been deducted. You cannot reduce the income by AED 375,000 first and then decide how much loss to use.
Can I choose to use only part of my brought-forward tax loss?
No. Tax losses must be set off against taxable income to the fullest extent possible in each tax period, subject to the 75% cap. A taxable person cannot elect to utilise a smaller amount to preserve losses.
What is the 75% rule for UAE corporate tax losses?
Under Article 37 of Federal Decree-Law No. 47 of 2022, the tax loss offset in any tax period cannot exceed 75% of the taxable income of that period before the offset. The unused balance carries forward.
What happens to the loss that cannot be used because of the 75% cap?
It carries forward to the next tax period and is again available for offset, subject to the same 75% limit, provided the ownership-continuity and business-activity conditions are still met.
Why does EmaraTax show a different loss figure from my accountant's calculation?
EmaraTax applies the 75% cap automatically from the taxable income before losses. If the manual computation deducted the AED 375,000 band first, the two figures will differ; the return is the correct one.
Is there any tax to pay in the example if the full 75% is used?
No. Taxable income after loss relief is AED 96,785, which is below AED 375,000, so the corporate tax liability is nil. Using the full 75% costs nothing this year.