UAE Corporate Tax: Key Insights on Small Business Relief

The UAE Corporate Tax Law, which takes effect from June 1st 2023, provides a framework for Small Business Relief. The Corporate Tax Law states that the small businesses that qualify as Resident Persons may elect to be treated as not having any taxable income for a tax period and therefore would pay zero corporation tax for that period. In April 2023, Ministerial Decision No 73 0f 2023 was issued to specify the criteria that Resident Persons would need to meet in order to qualify for Small Business Relief.

In this blog, we will explain the provisions included in the Ministerial Decision which will allow you to benefit from the Small Business Relief Mechanism envisioned in the Article 21 of the Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (UAE Corporate Tax Law). Corporate tax consultants in Dubai can help you make any business decision related to Small Business Relief. Read ahead for further insights:

Who can Claim the Corporate Tax Small Business Relief?

As per Ministerial Decision No 73 0f 2023, taxable persons who are resident persons are eligible to claim the Small Business Relief if their revenue in the relevant tax period and previous tax periods is below AED3 million for each tax period. If the revenue exceeds the threshold of AED 3 million in any tax period, the taxable person will not be eligible to apply for Small Business Relief.

What is the Applicability and Duration of the Small Business Relief?

The Ministerial Decision on Corporate Tax Small Business Relief states that the AED3 million revenue threshold will apply to tax periods beginning on or after June 1st 2023. It will only continue to apply to subsequent tax periods that end before or on December 31st 2026. Consult with trusted corporate tax advisers in Dubai for better clarity on the tax periods.

How to Determine the Revenue for Small Business Relief?

The revenue can be calculated based on the applicable accounting standards accepted in the UAE. Corporate tax consultants in Dubai can provide you with further assistance.

What is the Rule on Tax Loss Relief and Interest Deduction Limitation?

The Ministerial Decision allows the businesses to carry forward any incurred tax losses and any disallowed Net Interest Expenditure from such tax periods. However, it will only be allowed in tax periods where the Small Business Relief is not elected.

What Does the Decision Say About the General Anti-Abuse Rule?

Corporate tax advisers in Dubai advise taxable persons to consider the general anti-abuse rules (GAAR) of the Corporate Tax Law while applying for Small Business Relief. If a taxable person artificially separates their business or business activity and the total revenue of the entire business or business activity exceeds AED3 million in any tax period, the Federal Tax Authority (FTA) would consider it an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 regarding the GAAR.

Who are Not Eligible for Small Business Relief?

The following persons are not entitled to ally for the UAE Corporate Tax Small Business Relief:

  1. A Qualifying Free Zone Person
  2. Members of Multinational Enterprises Groups (MNE Groups) as defined in Cabinet Decision No. 44 of 2020 on Organising Reports Submitted by Multinational Companies. MNE Groups are groups of companies with operations in more than one country that have consolidated group revenues of more than AED3.15 billion.

Is the Small Business Relief Automatic?

The mechanism of Small Business Relief under the UAE Corporate Tax is not automatic. The taxable persons who are eligible for the Small Business Relief would be required to elect for application of this Relief and must comply with all other prescribed conditions.

Consult with the Best Corporate Tax Advisers in Dubai, UAE

The Small Business Relief is beneficial to start-ups and small enterprises who can rely on it to benefit from reduced tax costs and compliance requirements. However, you need to be aware of all the conditions and requirements before applying for Small Business Relief. Taxable persons eligible for this relief can ensure compliance with the help of corporate tax consultants in Dubai such as Jitendra Chartered Accountants (JCA). Our corporate tax consulting services in Dubai include CT Assessment & Advisory Services (one-time or retainer basis), CT Transfer price assessment services, CT Compliance Services & CT Agent Services to Represent to the Federal Tax Authority (FTA) of UAE in case of any notices served by FTA. Ensure corporate tax compliance and avoid relevant penalties by availing of JCA’s corporate tax services in Dubai, UAE. Talk to our consultants for tax solutions that you can count on.