Small Business Relief is an initiative designed to relieve small businesses of their financial burdens that they can redirect their resources towards growth and innovation. The scheme is a comprehensive corporate tax relief scheme, tailored for businesses with annual revenues up to AED 3 million. This article explains the provisions of the small business relief and how it benefits businesses. Tax Consultants Dubai, a reputable Tax Consultant in the UAE has a team of experienced tax professionals who can help you identify your eligibility for tax relief and ensure compliance with the corporate tax law.
Benefits of corporate tax relief for small businesses in the UAE
For qualifying businesses, Small Business Relief provides distinct benefits, such as:
- Exemption from Corporate Tax: Companies that choose Small Business Relief are not required to pay corporate tax on any portion of their taxable income. This exemption gives smaller businesses a significant financial boost by enabling them to keep a larger portion of their profits and use those funds for strategic initiatives.
- Simplified Tax Compliance: By doing away with the requirement to prepare and file comprehensive tax returns, the Small Business Relief makes tax compliance easier for qualifying businesses. Instead, companies can use a streamlined approach to tax calculation based on their gross revenue.
- Administrative Ease: The Small Business Relief helps businesses spend less time and money on tax-related issues by streamlining administrative procedures. Due to this simplification, businesses can concentrate on their core competencies and expansion plans.
Eligibility conditions for small business corporate tax relief in the UAE
To be eligible for the Small Business Relief, businesses need to fulfil the following requirements:
- Annual Revenue Threshold: The company’s yearly income cannot be more than AED 3 million
- Tax Residency: The company needs to be a UAE resident taxpayer
- Exclusion for Free Zones: Companies operating in free zones are not qualified for the SBR.
- MNE Exclusion: Small Business Relief is not available to individuals who are part of multinational enterprise groups (MNE Groups).
To effectively understand Small Business Relief eligibility in the UAE, it is advisable to seek the expert services of top Tax Consultants in UAE.
Timeline for Small Businesses Relief benefit
Small Business Relief will be in effect until December 31, 2026, and is currently available for tax periods beginning on or after June 1, 2023.
How Small Business Relief benefits the UAE economy?
- Improving Small Business Growth: Small Business Relief promotes small business growth and expansion by lowering their tax burden, which helps to diversify the economy and create jobs.
- Encouraging Entrepreneurship: Small Business Relief ‘s streamlined tax structure and lower compliance expenses encourage more people to launch and run their own companies, promoting an innovative and entrepreneurial culture.
Key considerations for Small Business Relief in the UAE
Some of the key considerations to avail small business relief in the UAE are as follows-
- If a resident’s revenue in the applicable and prior tax periods is less than AED 3 million for each tax period, they are eligible to apply for Small Business Relief. This implies that the Small Business Relief will cease to be available if a taxable person’s revenue exceeds the AED 3 million threshold during any given tax period.
- Starting on or after June 1, 2023, the AED 3 million revenue threshold will apply to tax periods. It will not apply to subsequent tax periods that conclude on or before December 31, 2026.
- The applicable accounting standards recognized in the United Arab Emirates can be used to calculate revenue.
- According to Cabinet Decision No. 44 of 2020 on Organizing Reports Submitted by Multinational Companies, Small Business Relief will not be granted to members of MNE Groups or Qualifying Free Zone Persons. MNE Groups are collections of businesses that operate across borders and have annualized group revenues greater than AED 3.15 billion.
- Businesses may carry forward any Tax Losses and any disallowed Net Interest Expenditure from tax periods specified in the decision where they choose not to apply for Small Business Relief, to be used in subsequent tax periods in which the Small Business Relief is not elected.
- Regarding the artificial separation of business, the Ministerial Decision states that in cases where taxable individuals have chosen to apply for Small Business Relief and the Federal Tax Authority (FTA) determines that they have artificially separated their business or business activity and that the total revenue of their business or activity exceeds AED3 million in any given tax period, this will be deemed an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 about the general anti-abuse rules of the Corporate Tax Law.
Avail the Services of Tax Consultants in Dubai
To effectively determine eligibility for availing small business relief, it is advisable for businesses to avail the expert services of Tax Consultants in UAE. Tax Consultants Dubai, a reputable Tax Consultant in the UAE has a team of experienced tax professionals who can help you identify your eligibility for tax relief and ensure compliance with the corporate tax law. Thus, contact us today and we shall be glad to assist you.
