Small Business Relief is primarily offered to small companies operating in the UAE that are residents of the country for the purpose of corporate tax. The main aim of providing this relief is to facilitate the integration of the corporate tax system. This relief for small businesses minimises small businesses' compliance duties in the initial phases of the corporate tax system. Thus, businesses are advised to seek the services of top Tax Consultants in UAE to effectively determine their taxability and to ensure compliance with the corporate tax law.
How to Determine a Small Business?
Taxable resident persons in the UAE, that are either juridical persons or natural persons, who have earned an income less than or equal to 3,000,000 dirhams in a single taxable period (including all previous taxable periods) that lasts till December 31, 2026, can apply for their income to be treated as non-taxable as a result not having to calculate or pay a tax return.
This means that the above taxable persons will be able to enjoy two kinds of relief i.e.,
- Tax Relief: No need to pay any corporate tax for a particular taxable period.
- Administrative Relief: No need to calculate income and enjoy simple requirements for record keeping and tax filing.
Which Businesses are not Eligible for Small Business Relief?
Taxable resident persons whose income remains less than or equal to 3,000,000 dirhams in a taxable period will be eligible for small business relief. However, there are a few exceptions that will not get small business relief. These exceptions are the following;
- Members of a Multinational Enterprise
Any business that works as a constituent company of a large Multinational Enterprise Group (MNE) will not be eligible to apply for small business relief. MNEs and their constituents operate internationally and have a large revenue of about 3 billion dirhams. Also, MNEs have to prepare for and comply with the tax laws of all countries where they operate at a time. Even if the UAE constituent of an MNE meets the criterion, it will still not be considered eligible for small business relief.
- A Qualifying Freezone Person
According to corporate tax legislation, qualifying freezone persons already enjoy a zero percent corporate tax rate, therefore, they will not be able to apply for any small business relief.
- Artificially Separated Business
If a taxable business separates itself into more than one business for the purpose of keeping its total revenue less than 3,000,000 dirhams per taxable period, such business will not be able to get small business relief. Whereas, if the Federal Tax Authority finds out about any such case, the business will have to pay each and every payable tax along with the penalties that will be charged by the FTA for artificial separation.
How does Small Business Relief Work?
Small Business Relief enables qualifying resident businesses to determine whether they want to be classified as having zero tax-deductible revenue in a taxable period if their income in the corresponding taxable period that ends on or prior to December 31, 2026 is below or equal to 3,000,000 dirhams. Such businesses will not have to submit any corporate income tax as an effect of this arrangement. The value of due corporate income tax that is not required to be paid as a result of the small business relief will be determined by the business's profitability. This is due to the fact that if the Small Business Relief option was not selected, the corporate tax was going to be paid at a zero percent rate on tax-deductible revenue not exceeding 375,000 dirhams and 9% on tax-deductible revenue exceeding 375,000 dirhams. It clearly means that the value of corporation tax relief received by a company that qualifies for small business relief is proportional to its profitability.
How to get Small Business Relief from Corporate Tax in UAE?
The following steps are important to ensure to get small business relief;
- A Business that wishes to get small business relief will be required to register with the Federal Tax Authority and receive a Tax Registration Number for the purposes of corporate tax.
- The business will then have to elect for Small Business Relief in their Tax Return.
- The business will have to make an election for every tax period separately.
Choose Corporate Tax Advisory Services
Businesses are advised to seek the services of top Tax Consultants in UAE to effectively determine their taxability and to ensure compliance with the corporate tax law. Thus, contact us today and we shall be glad to assist you.
Mostafa is a seasoned Tax Consultant with over 5 years years of experience gained in diverse taxations matters. He has vast expertise in settling tax disputes with the Federal Tax Authority and handling of tax procedures in compliance with tax laws. He is adept in investigating underlying tax intricacies and offering expert tax advisory. He is also well-versed in conducting tax analysis’s and negotiations with the Tax Regulators, upon tax preparation and filing. Mostafa specializes in the areas of Tax law, Auditing, Accounting and Banking law.