SMALL BUSINESS RELIEF (AED 3M TURNOVER)

The United Arab Emirates (UAE) has introduced a Small Business Relief initiative under its Corporate Tax Law (Federal Decree-Law No. 47 of 2022) to support small enterprises. This relief allows eligible businesses with annual revenues not exceeding AED 3 million to be treated as having no taxable income, effectively exempting them from corporate tax for the applicable periods.

Revenue Threshold: The relief applies to businesses whose revenue does not exceed AED 3 million for each tax period. This threshold is applicable to tax periods starting on or after June 1, 2023, and ending on or before December 31, 2026 with a possibility for the extension.

Eligibility Criteria: Eligible entities include UAE resident juridical persons and individuals conducting business activities in the UAE. However, certain entities, such as qualifying free zone persons and members of multinational enterprise groups, may not be eligible for this relief.

Election Process: Businesses must elect to apply for the Small Business Relief by notifying the Federal Tax Authority (FTA) along with submission of their tax return for the respective tax period.

Limitations: Businesses opting for this relief cannot apply certain other corporate tax provisions, such as tax loss carry forwards. Additionally, the FTA may scrutinize arrangements where businesses appear to have artificially separated their activities to qualify for the relief while collectively exceeding the revenue threshold.

This initiative aims to foster growth among small businesses in the UAE by reducing their tax burden and simplifying compliance processes, thereby promoting a more favorable environment for entrepreneurship and economic development.

For more detailed information, you can contact us info@cmbs-tax.com

Disclaimer: According to a statement from the Ministry of Finance released on May 19, 2023, “several posts circulating on social media and other platforms by private individuals contain misleading and inaccurate interpretations of corporate tax.” The Ministry emphasized that the only official sources for information on federal taxes in the UAE are the Ministry of Finance and the FTA. This content has not been authorized by the Ministry of Finance or the FTA. The opinions and conclusions presented here are solely those of the author based on his interpretation of the UAE legislation.