Introduction:
The Corporate Tax Law in the United Arab Emirates (UAE) has introduced an important provision called Small Business Relief, aimed at lightening the corporate tax load for small businesses operating within the UAE. This relief mechanism simplifies compliance requirements, making it more accessible for eligible small businesses to navigate the UAE’s corporate tax landscape. To effectively harness this relief, businesses must thoroughly understand the eligibility criteria and associated conditions. Fortunately, the Federal Tax Authority (FTA) has recently unveiled a comprehensive resource, the “Corporate Tax Guide on Small Business Relief,” offering clarity on this vital aspect of corporate taxation. In this guide, we will explore key insights into eligibility criteria, operational mechanisms, availability duration, and compliance obligations related to Small Business Relief. Additionally, we will discuss the role of corporate tax consultants in Dubai, who can provide expert guidance on navigating the Small Business Relief scheme within the UAE’s corporate tax framework.
Understanding Eligibility for Small Business Relief: To qualify for Small Business Relief, businesses must meet specific eligibility criteria. In particular, they should be categorized as Resident Persons for Corporate Tax purposes and have an annual revenue total equal to or less than AED 3,000,000 in the relevant Tax Period, as well as in any preceding Tax Periods. The good news is that there are no additional requirements to meet beyond these eligibility criteria to access corporate tax small business relief.
Exclusions: Multi-National Enterprises (MNEs) and Qualifying Free Zone Persons: It’s important to note that Multi-National Enterprises (MNEs) and Qualifying Free Zone Persons are not eligible to opt for Small Business Relief. MNEs are defined as groups comprising two or more companies operating in different countries or including a single company that is resident in one country while being subject to tax in another, with a total consolidated group revenue of at least AED 3.15 billion.
Similarly, Qualifying Free Zone Persons are ineligible for Small Business Relief, even if they are residents of the UAE and have revenue equal to or less than AED 3,000,000 in the relevant Tax Period and all previous Tax Periods. However, Free Zone Persons that do not meet the criteria for Qualifying Free Zone Persons can choose to apply for Small Business Relief if they meet the revenue threshold.
Tax Period Restrictions and Implications: A significant restriction applies to tax periods, with an important cut-off date set for tax periods ending on or before December 31, 2026. Small Business Relief becomes available for Tax Periods commencing on or after June 1, 2023. Furthermore, it remains accessible for Tax Periods concluding on or before December 31, 2026, provided that the revenue in the relevant Tax Period and all prior Tax Periods does not exceed AED 3,000,000.
Small Business Relief for Tax Groups: Under the UAE corporate tax regime, tax groups can also opt for Small Business Relief if their collective revenue falls at or below AED 3,000,000. Since a tax group is treated as a single Taxable Person, the revenue threshold for Small Business Relief applies to the group as a whole, rather than to individual members of the group. Regardless of the number of companies comprising the Tax Group, the AED 3,000,000 revenue threshold is a collective criterion.
Compliance Obligations under Small Business Relief: Businesses choosing Small Business Relief must fulfill specific compliance obligations, which include:
- Registering for corporate tax.
- Electing for Small Business Relief in the Tax Return.
- Maintaining accurate records to substantiate their revenue