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Tax losses carried forward

How Verasol records a year's tax loss when its return is filed, how to enter a loss from before your books start, and how later returns use it, up to 75% of their taxable income.

For Verasol 2.12·4 min read

When a year ends with a tax loss, Verasol records the loss when you file that year's return. Later returns then use it by themselves, up to 75% of their taxable income, until it is used up. You do not enter losses by hand: they come from the returns you file in Verasol. The one exception is the loss of a year before your books in Verasol start, which you enter once as an opening tax loss.

See your losses#

On the corporate tax dashboard, the Available Losses box shows what is left to use. For the detail, click Tax Losses under Quick Actions.

The Tax Loss Carry-Forward screen. This company has no tax losses.
  • 1 Available Losses: what later returns can still use.
  • 2 Total Utilized: what returns have used so far.
  • 3 Utilization Limit: the share of a year's taxable income that losses can offset, 75%.
  • 4 Loss Pool: each year's loss with its Original Amount, what is Utilized, what is Remaining, and when it Expires. Verasol sets no expiry date on a loss, so the column reads No expiry.
  • 5 Opening tax loss enters the loss of a year before your books start (see below).

Utilization History lists the returns that use losses, with the amount and the date the return was filed. A return that is calculated but not filed yet has no date there.

How a loss is recorded#

  • When a return's Adjusted Taxable Income is below zero, its Tax Losses box shows the loss under Carry Forward. Verasol records it as the loss of the year when you file the return.
  • A year with Small Business Relief elected records no loss.
  • Amending the return updates the loss. Reopening the return removes it until the return is filed again.

A loss from before your books start#

If a tax period that ended before your books in Verasol start closed with a tax loss, enter that loss once, as its return filed with the FTA shows it:

  1. Click Opening tax loss.
  2. Enter the Financial Year of the loss and the Tax loss (AED). You can add Notes.
  3. Click Save opening tax loss.

The window names the last day such a tax period can end: the day before your books start. Verasol refuses a year that ends after that day, a year that started before corporate tax applied (before 1 June 2023), and a year whose corporate tax return has been filed or booked in Verasol. While a year has an opening tax loss, Verasol prepares no return for it.

Verasol makes no journal entry for it: a tax loss is not on the balance sheet. The loss appears in the Loss Pool with the Opening badge, and later returns use it like any other loss, up to 75% of their taxable income. The pencil button (Correct) changes the amount, but not below what filed returns have already used of it. The cross button (Remove) is offered only while no filed return has used the loss.

How later returns use a loss#

When you calculate a return whose adjusted taxable income is above zero, Verasol takes the losses of earlier years, oldest year first, up to 75% of that income. Do not enter a loss as an adjustment on the return: Verasol deducts losses itself. The return shows the amount as Less: Loss Utilized in the Tax Liability, and in its Tax Losses box:

  • Brought Forward: the losses available to the year;
  • Utilized: what this return uses;
  • Carry Forward: what is left for later years, plus a loss of the year itself.
The Tax Losses box on a return

For example, with a loss of AED 200,000 brought forward and an adjusted taxable income of AED 160,000, the return can use at most AED 120,000 (75% of 160,000). The taxable income is then AED 40,000, and AED 80,000 is carried forward.

Until the return is filed, its use of a loss is only a calculation and the loss stays available. Filing the return records the use; reopening it gives the loss back. A year with Small Business Relief elected uses no losses.

Verasol keeps each company's own losses. The screen's How Loss Carry-Forward Works box sums up the rules: a loss is carried forward with no time limit as long as the same owners keep at least 50% or the same business continues (Article 39), and a loss can be transferred to another company of the same group only under the conditions of Article 38. Verasol does not record such a transfer. Whether these conditions are met, for example after a change of ownership, is a question for your tax adviser.