TAX LOSS PROVISIONS
A.) Conditions for Tax Loss Relief
- Maximum Los relief allowed is 75% of Taxable Income in one Financial year & balance against subsequent periods.
- Cannot Claim Tax Loss for Losses incurred before a person becomes a taxable person
- Cannot claim Tax Loss relief for Losses incurred before date of commencement of Corporate Tax
- Cannot claim Tax Loss relief for Losses incurred from an asset/activity which is exempt.
- Tax Loss can be c/f if Taxable person owns >= 50% ownership from start to end of tax period & same/similar business following change in ownership of more than 50%.
- The above conditions are not applicable to taxable person listed on stock exchange.
- Where a Taxable Person transfers its Tax Loss to another Taxable Person;
the Taxable Person which the Tax Loss is transferred to shall reduce its Taxable Income for the relevant Tax Period;
the total Tax Loss offset shall not exceed the amount allowed i.e. 75% threshold. and
the Taxable Person shall reduce its available Tax Losses by the amount of the Tax Loss transferred to the other Taxable Person for the relevant Tax Period.B
B.) Transfer of Tax Losses:
A Tax Loss or a portion may be offset against the Taxable Income of another Taxable Person where all of the following conditions are met:
- Both Taxable Persons are juridical persons.
- Both Taxable Persons are Resident Persons.
- Either Taxable Person has a direct or indirect ownership interest of at least 75% in the other, or a third Person has a direct or indirect ownership interest of at least 75% in each of the Taxable Persons.
- The common ownership under paragraph (c) of Clause 1 of this Article must exist from the start of the Tax Period in which the Tax Loss is incurred to the end of the Tax Period in which the other Taxable Person offsets the Tax Loss transferred against its Taxable Income.
- None of the Persons are an Exempt Person and Qualifying Free Zone Person.
- The Financial Year of each of the Taxable Persons ends on the same date & Both Taxable Persons prepare their financial statements using the same accounting standards.
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