22 August, 2023

Corporate Tax Relief for Small Businesses in the UAE

tax for small businesses in the uae

The UAE has introduced corporate tax in the UAE which is valid for all businesses. It will be implemented from the fiscal years starting from June 1, 2023 or after. The corporate tax rate was earlier set at 9% of the total corporate income while the taxable income was set at AED 375,000 as per the announcement made in December 2022.

Federal Decree-Law No. 47 of 2022 on the Taxation of Businesses and Companies (the “Corporate Tax Law”) has been amended by Ministerial Decision No. 73 of 2023 on Small Business Relief.

Recently, however, the government has released a notification that there will be a “ Small Business Relief Initiative “ provided to those who have net profit equivalent to or less than AED 3 Million. It can be beneficial for Small, Micro Businesses and Startups.

This step aims to reduce the financial burden of corporate taxes and compliance costs for small businesses with lower revenue.

The relief is valid till December 31st, 2026 starting from June 1st, 2023.

The corporate tax law in the UAE exempts a few entities. These include companies involved in natural resources extraction in the nation. These companies however, are still subject to local taxes imposed on the Emiratis.

Other exempted individuals include government entities, pension funds and funds that have been invested.

If a taxable person has an income above AED 3 Million in any tax year and has applied for the small business relief program, then the person would be considered as making an arrangement to get corporate tax advantages under the Article 50 regarding general anti-abuse rules of the corporate tax law.

It is the duty of the company and the individual owning it to make sure that all the documents are submitted according to the regulations and requirements of FTA.

The exemption, however, would not be accessible to qualifying free zone residents or members of Multinational Corporate Entities having activities in more than one country and consolidated group revenues of more than Dh3.15 billion, according to the ministry.

The law has been introduced to help the nation grow and get a stronger economy. The relief has been provided to release the pressure that the small businesses might be feeling due to the new introduction.

It is essential to ensure that you and your company complies with the rules and laws of the nation to ensure a smooth functioning of your business. This will also ensure that your business is seen as a credible one and lets you get a better client base.

For tax years outlined in the Ministerial Decision, enterprises who do not file for Small Business Relief will be permitted to carry over any incurred tax losses and any disallowed net interest expense for use in future tax periods.

How can I claim the Tax Relief?

Taxable residents can claim Small Business Relief if their revenue in the relevant tax period and preceding tax periods is less than Dh3 million each tax period. The revenue can be known based on the accounting standards that have been set in the UAE. To know more about these standards, you can contact us.

Do I need UAE Residency to claim the Tax Relief?

Yes. Taxable individuals who reside in the nation and whose revenue in the relevant and prior tax periods was less than Dh3 million for each period are eligible to apply for Small Business Relief.

How is the Revenue for the Tax relief determined?

Businesses are required to ensure that the documents submitted to the FTA are correct and comply with the law by conducting a self assessment. The revenue is decided based on the guidelines decided by the government and you can contact us to get help in ensuring that you comply with them all.

How can RadiantBiz help?

Are you someone who is not sure if you count as a small business or not? Or are you unsure about the various rules and regulations? Don’t worry, we have your back. We at RadiantBiz are the best business setup consultants in Dubai with 12+ years of experience in the field and have catered to thousands of clients from 100+ countries. We have helped people take their business to heights in the UAE. Get started with your dream business in the UAE with our wide range of business setup services. We will guide you from start to finish.

Our experts have all the knowledge you need to excel in your field. With our custom strategies, failure is not an option. Contact us today and don’t worry about compliance issues, corporate banking, tax related services and other aspects of business setup. Get started with our experts today. You can also use our cost calculator to get an idea of the budget needed for your Dubai free zone company formation.

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