Background
Article 21 of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law” / “CT law”) specifies ‘Small Business Relief’ (‘SBR’). As per the aforesaid article, a taxable person may elect to be treated as not deriving any taxable income during a given tax period, where the revenue of the taxable person does not exceed a prescribed threshold.
The Ministry of Finance (‘MoF’) of the United Arab Emirates (‘UAE’) has now prescribed the threshold for claiming SBR vide Decision No. 73 of 2023 on 06 April 2023 inter alia providing various provisions for availing SBR. The synopsis of the said Ministerial Decision has been captured below.
Eligibility
Threshold
Exclusions
Opting out
Anti abuse provision
Our comments
The intention of the decision is to provide relief to small businesses like start-ups and other small or microbusinesses which are forming significant part of the UAE’s economy. While the intention of the FTA is to simplify the compliance obligations of small businesses with the release of this Cabinet Decision, however, there are certain compliances that are required to be undertaken by small businesses, which are as follows:
There is an explicit relief provided to small businesses under Article 21 from the compliance burden of Transfer Pricing Documentation (under Article 55).
In view of above, small
taxpayers should critically assess the conditions to opt-in or opt-out of the relief
scheme by taking into account various aspects such as losses in the current
period and potential future profits, business restructuring relief etc.
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