Small Business Relief – Positive Development!
In order to support start-ups and other small or micro businesses, UAE Ministry of Finance announces Small Business Relief.
What is ‘Small Business Relief’?
- Businesses with revenue below a certain threshold can claim ‘small business relief’ and be treated as having no taxable income
- Small Business Relief means simplified compliance obligations
- Will not be required to comply with transfer pricing documentation rule
- To claim relief an election must be made to the Federal Tax Authority
What’s new about Small Business Relief?
On 6th April 2023, Ministerial Decision No. 73 of 2023 has been issued, prescribing conditions for Small Business Relief. Key aspects are as follows:
- Who can claim relief – Resident taxable persons (legal / juridical or individual)
- Criteria for relief – Annual revenue in the relevant and previous tax periods is below AED 3 million
- Relief available from which tax period – Tax periods starting on or after 1 June 2023
- Relief available upto which tax period – Tax periods ending before or on 31 December 2026
- Who cannot claim relief – “Qualifying Free Zone Persons” or “Entities forming part of MNE groups with consolidated group revenues of more than AED 3.15 billion”.
- Carry forward of “Tax Loss” and “Excess Net Interest Expenditure” allowed for the tax periods where Small Business Relief not elected
- Anti-abuse provisions would apply in case of artificial separation of business to take benefit of Small Business Relief
MCA’s Comments
- Annual revenue threshold of AED 3 million will really give immense compliance relief to small businesses.
- Advisable to begin the assessment of whether a business would be entitled for a small business relief or not.
- Decision of whether to elect for a small business relief or not should be made only after detailed analysis of all the provisions of UAE Corporate Tax Law and cabinet / ministerial decisions which will issued subsequently.
- Entities should also review their business plans and projections to assess whether they need to elect for small business relief depending on their current and future profitability
- Maintaining books of accounts would be key to claim a relief, as it will substantiate that the annual revenue is below the threshold
Disclaimer: UAE Corporate Tax (CT) Law has been recently introduced. This is a summarised version of the CT law sections and it is advised to refer to the detailed law provisions prior to initiating any decisions.
