The UAE’s Ministry of Finance has introduced Small Business Relief as part of its Corporation Tax Law, providing critical support for start-ups and small businesses. This relief, which became effective on June 1, 2023, is designed to alleviate the tax burden and compliance costs for eligible businesses. Here are the key details of this tax relief:
Summary
Threshold-Based Relief:
Small Business Relief under the UAE’s Corporation Tax Law allows eligible businesses with a revenue below AED 3 million for each tax period to be treated as if they have not derived any taxable income.
Effective Period:
This relief applies to tax periods starting on or after June 1, 2023, and continues to be in effect until tax periods ending on or before December 31, 2026.
Revenue Calculation:
The calculation of revenue for the purpose of this relief can be based on the applicable accounting standards accepted in the UAE.
Exclusions:
Small Business Relief is NOT available to Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups) that have consolidated group revenues exceeding AED3.15 billion.
Carry-Forward Provisions:
In tax periods where businesses do not opt for Small Business Relief, they are permitted to carry forward any Tax Losses and disallowed Net Interest Expenditure incurred during these periods. These can be used in future tax periods where the relief is not elected.
Anti-Abuse Measures:
Regarding the artificial separation of business, it’s important to note that if the Federal Tax Authority (FTA) determines that taxable persons have artificially separated their business activities and the total revenue of the entire business or business activity exceeds AED3 million in any tax period, and these persons have elected to apply for Small Business Relief, such actions may be considered as an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the Corporate Tax Law.
Ministerial Decision:
The detailed provisions and conditions for Small Business Relief, including the revenue threshold and treatment of Tax Losses and disallowed Net Interest Expenditure, are specified in Ministerial Decision No. 73 of 2023 issued by the Ministry of Finance.
Further Information:
For access to all Cabinet Decisions and Ministerial Decisions related to the Corporate Tax Law, you can visit the Ministry of Finance’s official website at www.mof.gov.ae.