The UAE government has introduced a new tax regime, the UAE Corporate Tax (CT), which was effective from 1 June 2023. The CT is a tax on the net profits of businesses. Small businesses are the backbone of any economy, and the United Arab Emirates (UAE) recognizes their importance by implementing various measures to support their growth. One such measure is corporate tax relief, which provides significant benefits to small businesses operating within the UAE.
Overview of small business tax relief and its implications:
Small Business Relief is a game-changer for small businesses operating in the UAE. It allows eligible Resident Taxable Persons, both natural and juridical, to opt for an exemption from UAE Corporate Tax if their revenue meets the criteria. Those who elect for this relief benefit from significant advantages:
· Businesses opting for small business tax relief are not required to pay any corporate tax on income earned during the tax period.
· No obligation to calculate taxable income.
· Simplifying tax return filing.
Additional details about Small Business Relief:
· The reduction is available for tax years beginning after June 1, 2023.
· The revenue threshold of AED 3 million will apply to tax periods that end before or on 31 December 2026.
· A business can elect to claim the Small Business Relief for a particular tax period by filing a notification with the tax authorities.
· The relief can be claimed for multiple consecutive tax periods, as long as the business continues to meet the eligibility criteria.
Eligibility:
To qualify for Small Business Relief, a Taxable Person must meet certain criteria:
· Revenue must be less than or equal to AED 3,000,000 for the relevant Tax Period and all previous Tax Periods ending on or before December 31, 2026.
· The election for Small Business Relief must be made within the Tax Return for the respective Tax Period.
· To be eligible for small business relief the company should not be a member of a multinational enterprise group MNE, where consolidated group revenue exceeding 3.15 billion.
· Qualifying freezone persons are not eligible for small business relief.
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