Small Business Relief, in the context of UAE Corporate Tax, is a supportive initiative tailored for small businesses classified as residents for tax purposes. Its core objective is to simplify its adherence to the Corporate Tax framework. Small Business Relief eases the regulatory burden faced by small enterprises, particularly during the initial phases of the Corporate Tax system, by eliminating the necessity to compute and remit Corporate Tax. Thus, to effectively ensure compliance with the Corporate Tax Law, businesses are advised to seek the expert services of trusted Tax Consultants in UAE.
Eligibility for Small Business Relief
Eligibility for Small Business Relief extends to any Taxable Person, whether a Resident Taxable Person (either a Natural Person or a Juridical Person), whose Revenue remains at or below AED 3,000,000 within a relevant Tax Period, encompassing all prior Tax Periods culminating on or before December 31, 2026. Under this arrangement, they have the option to be treated as having no Taxable Income for that specific period. Consequently, they are relieved from the obligation to calculate their Taxable Income or complete a comprehensive Tax Return. This translates to a dual benefit for eligible Taxable Persons who opt for Small Business Relief:
Administrative Relief
They are exempt from the complexities of Taxable Income calculation and can adhere to simplified procedures for filing tax returns and maintaining records, including the option to prepare Financial Statements utilizing the cash basis of accounting.
Tax Relief
They are not mandated to pay any Corporate Tax on the income they generate during the Tax Period.
Eligible Taxable Persons can elect to avail Small Business Relief when submitting their Tax Return. Once this decision is made, they can complete a simplified Tax Return and benefit from the relief.
Read more: UAE corporate tax relief for small business
Revenue Threshold to Qualify for Small Business Relief
To qualify for Small Business Relief, there exists a Revenue Threshold. The Revenue of a Taxable Person must remain below or equal to AED 3,000,000 for the pertinent Tax Period and all prior Tax Periods. If a Taxable Person's Revenue exceeds AED 3,000,000 in a Tax Period, they forfeit the opportunity to opt for Small Business Relief, even if their Revenue subsequently falls below the AED 3,000,000 threshold in later Tax Periods.
It's important to note that the inaugural Tax Period for Corporate Tax commences on or after June 1, 2023, as stipulated in Article 2(3) of Ministerial Decision No. 73 of 2023. Whereas, the determination of Revenue adheres to applicable accounting standards recognized in the UAE. The Corporate Tax Law defines Revenue as "the gross amount of income derived during a Tax Period," encompassing all income streams from a business, including sales proceeds and other gross income sources such as asset sales. Notably, Profit, which denotes the disparity between Revenue and costs, does not impact eligibility for Small Business Relief. Revenue determination should adhere to the arm's length principle.
Read more: Corporate tax penalty for failure to submit a tax return within the due date
In the computation of Revenue, all Business Activities conducted by a specific legal entity and specific Business Activities of an individual are considered. As for who is ineligible for Small Business Relief, it is accessible to UAE Resident Persons whose Revenue does not surpass AED 3,000,000 for the pertinent Tax Period and all preceding Tax Periods. However, two critical exceptions to this criterion exist:
- Businesses that are affiliated with a Multinational Enterprise Group (MNE).
- Businesses that qualify as Qualifying Free Zone Persons.
Avail the Expert Services of Top Tax Consultants in UAE
To effectively implement Corporate Tax in compliance with statutory regulations, businesses are advised to seek the expert services of trusted Tax Consultants in UAE. Thus, contact us today and we shall be glad to assist you.
