Small Business Relief In The UAE
The provisions of the Corporate Tax Law shall apply to Tax Periods commencing on or after 1 June 2023. The Corporate Tax Law includes a specific relief for small Businesses
Who can elect for small business relief
Any eligible Taxable Person with Revenue below or equal to AED 3,000,000 in a relevant Tax Period and all previous Tax Periods that end on or before 31 December 2026 can elect to be treated as having no Taxable Income in that period, and will not be obliged to calculate its Taxable Income or complete a full Tax Return
Revenue threshold
To elect for Small Business Relief, an eligible Taxable Person’s Revenue must be below or equal to AED 3,000,000 for the relevant Tax Period and all previous Tax Periods. They will need to keep records of their Revenue to demonstrate their eligibility for the relief
How to elect for Small Business Relief
- First register with the FTA for Corporate Tax and obtain a TRN
- Elect for the relief through the filing of a simplified Tax Return
- Election must be made in each Taxable Period
- Once the Tax Return for the relevant Tax Period has been submitted with no election, there would be no possibility to claim this benefit at a later stage
Who is not eligible for Small Business Relief
- If business is a member of a Multinational Enterprise that operate in more than one country having a total consolidated group revenue of more than AED 3.15 billion and are required to prepare a Country-by-Country Report under the UAE’s Country-by-Country Reporting legislation
- Qualifying Free Zone Persons who already benefit from a 0% Corporate Tax rate on their Qualifying Income
What if elected for Small Business Relief
- Required to register for Corporate Tax
- Can file a simplified Tax Return
- No Corporate Tax to pay
- Can carry forward unutilized Tax Losses and Excess Interest Expenditure from previous Tax Periods and not from the relevant Tax Period
- Must comply with the Arm’s Length Principle
- Not required to maintain transfer pricing documentation
- Rules on Exempt Income do not apply
Restriction to Tax Periods
Small Business Relief will be available for :
- Tax Periods that begin on or after 1 June 2023, and
- End before or on 31 December 2026
Records required to be kept to demonstrate Revenue
- Under the Corporate Tax Law, all Businesses are required to maintain records and documentation that support the information provided in a Tax Return or in any other document to be submitted to the FTA and
- Enable the Taxable Person’s Taxable Income to be readily ascertained by the FTA
Examples of documents which need to be kept includes
(but is not limited to)
- Bank statements
- Sales ledgers
- Invoices or other records of daily earnings, such as till rolls
- Order records and delivery notes
- Other relevant Business correspondence
Implications for Resident Persons that are VAT registered
Small Business Relief is a Corporate Tax relief. It does not change the Resident Person’s compliance requirements for VAT or any other purpose in any way. This means that while some Taxable Persons can benefit from Small Business Relief for Corporate Tax purposes and therefore have simplified Corporate Tax compliance requirements, their VAT compliance requirements will continue as before
Implications on General Interest Deduction Limitation Rule
If a Business has Net Interest Expenditure carried forward from a previous Tax Period, this will be carried forward to future Tax Periods, and can be utilised in future Tax Periods in which the Business does not elect for Small Business Relief. However, the Tax Periods in which Businesses elect for Small Business Relief will continue to be counted for the purposes of limiting the carry forward to ten subsequent Tax Periods from the Tax Period in which the Net Interest Expenditure was disallowed. The limitation on the deductible Net Interest Expenditure shall not apply where the Net Interest Expenditure for the relevant Tax Period does not exceed AED 12,000,000
Other points
Permanent Establishments of Non-Resident Persons in the UAE would be eligible for the Small Business Relief, if the Double Taxation Agreement in force includes provisions dealing with non- discrimination of a Permanent Establishment based on the OECD Model Tax Convention or the UN Model Double Tax Convention
