UAE corporate tax relief for small businesses statute was enforced through Ministerial Decision No. 73 of 2023 in line with Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the UAE Corporate Tax Law). Subsequently, taxable persons are advised to seek the services of accredited tax consultants in the UAE to seamlessly establish their taxability and stay compliant with the UAE corporate tax law and standards.
Objectives of UAE corporate tax relief for small businesses
Primarily, UAE corporate tax relief for small businesses seeks to endorse start-ups and other emerging small or micro businesses by lessening their corporate tax burden and overall compliance costs.
Conditions for taxable persons to qualify for small business relief
The Ministerial Decision on small business relief furnishes with clarity the revenue threshold and conditions for taxable persons to qualify for Small Business Relief and establishes the provisions of the extended tax losses and disallowed net Interest expenditure under the small business relief scheme. The conditions are as follows:
- Juridical taxable persons that have tax residence in the UAE qualify for corporate tax small business relief if their revenue in the specific tax period and prior tax periods is beneath AED 3 million for a singular tax period. Thus, this affirms that the taxable person will not qualify for small business relief if the revenue threshold exceeds AED 3 million in the relevant tax period.
- As conferred in the Ministerial Decision, the standard revenue threshold of AED 3 million will be applicable to tax periods commencing on or after the 1st of June 2023 and shall proceed to be effective to the following tax periods that end before or on 31 December 2026.
- Essentially, the relevant accounting standards approved in the UAE are the primary yardstick to determine and establish the taxable person’s revenue.
- In the same instance, UAE taxable persons that qualify for small business relief will not qualify to be Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups). The UAE tax statute defines MNE Groups as groups of companies that have business operations in more than one country with an integrated group revenue which is more than AED3.15 billion.
- In tax periods defined in the decision where If taxable persons do not choose to apply for Small Business Relief in a relevant tax period, they will have the right to be able to advance any acquired tax losses and any prohibited exclusive interest expenditure following in such tax periods.
- Under the purview of artificial detachment/disconnection of business, the Ministerial Decision stipulates that:
- Where the Federal Tax Authority (FTA) concurs that taxable persons have artificially detached their business operation and the overall revenue of the entire business operation goes beyond AED 3 million in a relevant tax period and such taxable persons have chosen to apply for Small Business Relief, this will be regarded as a plan to avail corporate tax advantages as per the corporate tax law (article 50) regarding the general anti-abuse rules.
Read more: Exemptions under Corporate Tax Law, UAE
Avail the services of top tax consultants in the UAE
Essentially, taxable persons are compelled to implement the UAE tax standards and to stay compliant with the Federal Tax Authority’s regulations to which noncompliance accrues fines. Thus, it is advisable for taxable persons to seek the services of accredited tax consultants in UAE. Contact us today and we shall be glad to assist you!
Mohammad is a qualified Legal Consultant with over 5 years of experience gained, in diverse intricate tax matters, he has high expertise in conducting tax negotiations and investigations with the Federal Tax Authority and other external tax Bodies. He has vast experience in reviewing and drafting tax documents. Mohammad has also advised on a plethora of tax matters, he draws much attention to tax filing procedures and to offering professional investigations of underlying tax complexities.