UAE Tax CT Losses, tax groups and tax credits: practice questions with answers

Question 1

Saffar Interiors LLC, a mainland company with a 31 December year-end, has an unused tax loss of AED 2,600,000 from its tax period ended 31 December 2024. Its shareholders have not changed. For the tax period ended 31 December 2025 its taxable income before any loss relief is AED 2,000,000. It claims the maximum loss relief allowed. What is its Corporate Tax payable for 2025?

1. A AED 0
2. B AED 11,250
3. C AED 45,000
4. D AED 146,250

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Answer: B. Under Article 37(2), Federal Decree-Law No. 47 of 2022 (CT Law), loss relief in a period cannot exceed 75% of that period's taxable income before loss relief.

Maximum relief = 75% x AED 2,000,000 = AED 1,500,000 (the loss of AED 2,600,000 is larger, so the cap binds).

Taxable income after relief = AED 2,000,000 - AED 1,500,000 = AED 500,000.

Corporate Tax = (AED 500,000 - AED 375,000) x 9% = AED 11,250 (Article 3; Cabinet Decision No. 116 of 2022).

The unused AED 1,100,000 of the loss is carried forward.

Question 2

Samar Packaging LLC, a calendar-year mainland company, has the following losses. Ownership has never changed. Which loss can be carried forward and offset against its taxable income for 2026?

1. A The tax loss of its mainland operations for 2025, a year with no reliefs or elections
2. B The loss of its foreign branch for 2025, for which it elected the foreign PE exemption
3. C The accounting loss of its operations for the calendar year 2023, before Corporate Tax applied
4. D The loss of 2024, a year in which it was an Exempt Person, before it became taxable on 1 January 2025

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Answer: A. Article 37(3), Federal Decree-Law No. 47 of 2022 (CT Law), denies loss relief for losses incurred before Corporate Tax commenced, before the person became a taxable person, or from assets or activities whose income is exempt (for example a foreign permanent establishment covered by the Article 24 election).

Only the 2025 mainland tax loss is available, and it can offset up to 75% of 2026 taxable income before loss relief (Article 37(2)).

Question 3

Tannour Kitchens LLC runs two restaurants and has unused tax losses of AED 1,100,000 from 2024 and 2025. On 1 February 2026 an unrelated hospitality investor bought 100% of its shares. The new owner kept both restaurants, the kitchens, staff and brand, and added a delivery-only service prepared in the existing kitchens from the existing menus. Which statement about the losses is correct?

1. A They are forfeited, because a change of more than 50% in ownership always cancels losses
2. B They are forfeited, because adding a delivery service is a significant change to the business
3. C Half of them remain available, because the old owners held the shares for half of the loss periods
4. D They remain available, subject to the 75% cap, because the same or a similar business continues

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Answer: D. Article 39(1), Federal Decree-Law No. 47 of 2022 (CT Law): losses may be carried forward if the same persons held at least 50% throughout, or, if not, the taxable person continues the same or a similar business. Article 39(2) looks at factors such as use of all or part of the same assets, no significant change to the core identity or operations, and whether changes result from developing or exploiting pre-existing assets, services, processes or products.

The 100% sale fails the ownership test, but Tannour keeps its restaurants, kitchens, staff and brand, and the delivery service exploits existing kitchens and menus. The losses survive and can offset up to 75% of taxable income each year (Article 37(2)).

Question 4

Layan Holding LLC heads a tax group. Its subsidiary Layan Marine LLC was a member for the whole of 2025 and left the group with effect from 1 January 2026. The group's Corporate Tax for 2025 remains unpaid and the FTA has approved no limitation of liability. Which statement is correct?

1. A The FTA can recover the unpaid 2025 tax only from Layan Holding, because the parent alone represents the group
2. B Layan Marine is liable only for the tax on its own share of the group's 2025 taxable income
3. C Layan Marine has no liability for 2025, because it was no longer a member when the tax fell due
4. D The FTA can recover the unpaid 2025 tax from Layan Marine, as members are jointly and severally liable for periods of membership

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Answer: D. Under Article 40(4)-(6), Federal Decree-Law No. 47 of 2022 (CT Law), the tax group is one taxable person represented by the parent, but the parent and each subsidiary are jointly and severally liable for the group's Corporate Tax payable for the tax periods in which they were members. Article 40(7) lets the FTA, on application, limit that liability to one or more members; no such approval exists here, so the FTA may pursue Layan Marine for the 2025 tax.

Question 5

On 1 April 2025 Hilal Holding LLC transferred a warehouse to Hilal Realty LLC, a member of the same tax group, for AED 2,700,000. Its net book value was AED 2,000,000, and the AED 700,000 gain was eliminated on consolidation. In September 2026 Hilal Holding sold all its shares in Hilal Realty to a third party, so Hilal Realty left the group. What is the tax consequence of the warehouse transfer?

1. A None, because the gain was eliminated in a return already filed and eliminations are final
2. B The full AED 2,700,000 proceeds become taxable income, because the asset has left the group
3. C The AED 700,000 gain is brought into taxable income, because the transferee left the group within two years of the transfer
4. D The AED 700,000 gain becomes taxable only if Hilal Realty sells the warehouse outside the group within two years

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Answer: C. Article 42(9), Federal Decree-Law No. 47 of 2022 (CT Law): intra-group elimination does not apply to an asset transferred between members where the transferor or transferee leaves the tax group within two years of the transfer. Article 42(10): the income deferred is recognised when the member leaves and the asset's tax cost base is adjusted. Hilal Realty left the group well within two years of the April 2025 transfer, so the AED 700,000 gain (AED 2,700,000 - AED 2,000,000) becomes taxable.

Question 6

Bustan Consulting LLC's 2025 taxable income includes AED 600,000 of profit from a foreign branch that paid foreign income tax of AED 150,000. The UAE Corporate Tax attributable to that income is AED 54,000, so its foreign tax credit for 2025 is AED 54,000. What happens to the remaining AED 96,000 of foreign tax?

1. A It is carried forward and credited against Corporate Tax in later tax periods
2. B It is refunded by the FTA once the 2025 return has been filed
3. C It is lost: it cannot be carried forward, carried back or refunded
4. D It is deductible as an expense in computing 2025 taxable income

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Answer: C. Article 47(2) and (3), Federal Decree-Law No. 47 of 2022 (CT Law): the foreign tax credit is limited to the UAE Corporate Tax due on the relevant income, and any unused amount cannot be carried forward or back. Refunds under Article 49 cover excess withholding tax credit or tax overpaid, not excess foreign tax. Foreign income taxes are not deductible (Article 33). The AED 96,000 (AED 150,000 - AED 54,000) is therefore a permanent cost.