In an effort to support the growth and sustainability of small businesses in the United Arab Emirates (UAE), the government has introduced Small Business Relief as part of its Corporate Tax regime. This relief is designed to alleviate the compliance burden on eligible small businesses, offering both administrative and tax relief to those who qualify.
CORPORATE TAX - SMALL BUSINESS RELIEF IN THE UAE
CORPORATE TAX - SMALL BUSINESS RELIEF IN THE UAE
Small Business Relief is a special provision for Resident Persons – either Natural Persons or Juridical Persons – subject to Corporate Tax in the UAE. To be eligible, a business must have Revenue below or equal to AED 3,000,000 (ca. USD 816,876) in the relevant Tax Period and all previous Tax Periods ending on or before December 31, 2026. Eligible businesses can choose to be treated as having no Taxable Income for that period, sparing them from the obligation to calculate and pay Corporate Tax.
This relief provides a dual advantage:
- Administrative Relief: Businesses opting for Small Business Relief are exempt from calculating their Taxable Income, benefit from simplified tax return filing, and can use the cash basis of accounting for Financial Statements preparation.
- Tax Relief: Businesses under Small Business Relief are not required to pay Corporate Tax on income earned in the Tax Period.
Who Qualifies for Small Business Relief
Small Business Relief is available to Resident Persons (e.g. company incorporated or established in UAE) whose Revenue remains below AED 3,000,000 for the relevant Tax Period and all previous Tax Periods. However, there are two exceptions:
- Multinational Enterprise Group (MNE) Members: Businesses belonging to a Multinational Enterprise Group are not eligible for Small Business Relief.
- Qualifying Free Zone Persons: Similarly, businesses classified as Qualifying Free Zone Persons are not eligible for this relief.
MAKING THE ELECTION
MAKING THE ELECTION
Small Business Relief is optional, and businesses seeking to benefit from it must make an election within their Tax Return. The election must be made for each Tax Period when filing the Tax Return. Once a Tax Return is submitted without the election for Small Business Relief, the opportunity to claim this benefit is lost.
To make the election, eligible businesses must first register for Corporate Tax with the Federal Tax Authority (FTA) and obtain a Tax Registration Number (TRN). Subsequently, they need to include the election in their Tax Return and maintain records demonstrating their eligibility for the relief.
To make the election, eligible businesses must first register for Corporate Tax with the Federal Tax Authority (FTA) and obtain a Tax Registration Number (TRN). Subsequently, they need to include the election in their Tax Return and maintain records demonstrating their eligibility for the relief.
IN SUMMARY
IN SUMMARY
Small Business Relief in the UAE offers businesses the flexibility to decide, during the preparation of the tax return for the previous year, whether to utilize the relief. This means you don't have to make an upfront decision. However, it's essential to note that businesses must still register for Corporate Tax to avail themselves of this opportunity. With revenues under AED 3,000,000, businesses can strategically leverage this relief to pay no taxes on profits in UAE, aligning their tax approach with their financial goals.
