The UAE Corporate Tax Law (CTL) has introduced the Small Business Relief Regime (SBRR) under Art. 21, offering a tax benefit to resident taxable persons subject to specific conditions. The Ministry of Finance recently issued Ministerial Decision No. 73 of 2023 on Small Business Relief to support start-ups and small businesses with limited resources in meeting corporate tax compliance requirements.
Does the ministry mean no taxes will be paid?
Any UAE resident taxable person with revenues below the Dh3 million threshold and meeting other conditions can claim the Small Business Relief by electing not to derive any “taxable income” during the relevant tax period. This means that revenue earned below the threshold will not be subject to corporate tax as it will not be considered “taxable income.”
What about qualifying businesses earning Dh375,000 or more?
The Small Business Relief is different from the 0% corporate tax rate applicable to “taxable income.” If a taxable person’s revenues exceed Dh3 million, they won’t qualify for the Small Business Relief. However, their taxable income up to Dh375,000 will be subject to a 0% tax rate, while any income above this threshold will face a 9% corporate tax rate.
What if companies don’t take advantage of this Small Business Relief Regime?
Claiming the Small Business Relief restricts certain reliefs and deductions for the relevant tax period. For some unprofitable UAE resident taxable persons after 1 June 2023, it may be advantageous not to claim the relief. This allows them to carry forward tax losses and disallowed net interest expenses for use in future tax periods when the relief is not chosen or available.
Conditions for eligibility for Small Business Relief Regime
- Three million Dirhams revenues threshold: Resident taxable persons with revenue below AED 3 million in the relevant and previous tax periods can claim SBRR based on applicable accounting standards (e.g., IFRS).
- Not a Qualifying Free Zone Person: Those defined as a Qualifying Free Zone Person under Art. 18 of CTL are ineligible for the relief.
- Not a member of a big Multinational Enterprises Group: Members of big multinational groups with consolidated group revenue exceeding AED three billion are not eligible for SBRR, even if their UAE business units have revenues below the three million thresholds.
At Alliance Prime, our team of experts can assist you in understanding and optimizing the benefits of the Small Business Relief Regime. We provide comprehensive accounting and tax consultancy services to help your business thrive in the UAE’s evolving tax landscape.
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