Corporate Tax Small Business Relief: FTA Releases New Guide
The Corporate Tax Law provides relief for small businesses resident in the UAE to ease their implementation of the Corporate Tax regime. This provision called the Small Business Relief minimizes the compliance obligations faced by small businesses, primarily by reducing the burden of having to calculate and pay Corporate Tax in the UAE. However, businesses need to understand the eligibility requirements and other conditions for electing small business relief in the UAE.
The Federal Tax Authority (FTA) has released the “Corporate Tax Guide on Small Business Relief“, which can help you understand the rules easily. The guide offers valuable insights on Small Business Relief such as the Eligibility criteria, the Mechanisms at play, the Duration of availability and Compliance checkpoints. Corporate tax consultants in Dubai can guide you further on the Small Business Relief scheme. Read ahead for more insights on the Small Business Relief scheme as per the UAE corporate tax law:
Eligibility Conditions for Small Business Relief
A business will be eligible for the Small Business Relief if it’s a Resident Person for Corporate Tax purposes and has Revenue of less than or equal to AED 3,000,000 in the relevant Tax Period and any previous Tax Periods. There are no additional requirements for meeting the eligibility criteria for corporate tax small business relief.
Can MNEs apply for Small Business Relief?
Multi-National Enterprises (MNEs) and Qualifying Free Zone Persons are not eligible to elect for Small Business Relief. An MNE is any group that is made up of two or more companies that operate in separate countries, or includes a single company that is resident in one country and subject to tax in another, and has a total consolidated group revenue of at least AED 3.15 billion.
Can Free Zone Persons Apply for Small Business Relief?
Qualifying Free Zone Persons are not eligible for the Small Business Relief even if they are residents of the UAE and have revenue equal to or less than AED 3,000,000 in the relevant Tax Period and all previous Tax Periods. However, Free Zone Persons that are not Qualifying Free Zone Persons can elect for the Small Business Relief if they meet the threshold limit.
Qualifying Free Zone Persons can elect to be subject to Corporate Tax under Article 19 of the UAE Corporate Tax Law for a specific Tax Period. In such a situation, they will be considered as normal Free Zone Persons and can elect for Small Business Relief if they meet the requirements. Corporate tax advisers in Dubai can advise you about the eligibility.
Restriction on Tax Periods
There is a restriction on tax periods ending on or before 31 December 2026. Small Business Relief will be available for Tax Periods that begin on or after 1 June 2023. Small Business Relief will be available for Tax Periods that end before or on 31 December 2026 in which the Revenue in the relevant Tax Period and all previous Tax Periods was less than or equal to AED 3,000,000.
Small Business Relief for Tax Groups
A tax group under the UAE corporate tax regime can elect for Small Business Relief if its revenue is equal to or below AED 3,000,000. Since the tax group will be treated as a single Taxable Person, the revenue threshold for Small Business Relief will apply to the Tax Group as a whole, rather than to each member of the Tax Group. Irrespective of how many companies make up the Tax Group, the Revenue threshold of AED 3,000,000 will apply to the Tax Group as a whole.
Compliance obligations under Small Business Relief
Businesses opting for the Small Business Relief are required to meet the following compliance obligations:
- Register for corporate tax
- Make the election for Small Business Relief in the Tax Return
- Keep relevant records to demonstrate the revenue
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