Small Businesses Relief:

1)   Introduction

The UAE Ministry of Finance has issued a Ministerial Decision on Small Business Relief for UAE Federal Corporate Tax (“CT”) purposes. Small Business Relief is aimed at supporting start-ups and other small businesses meeting the revenue threshold and other associated conditions.

The taxpayers entitled to claim the small business relief shall benefit from reduced tax burden and the compliance costs.

2)   Benefit

• Deemed to have no taxable income during the relevant Tax period.
• Simplified compliance obligations.
• Elimination of Transfer Pricing documentation requirements.
  
  

3)   Eligibility

• Resident taxable.
• Revenue in the relevant tax period and previous tax periods is less than AED 3 million.
• The threshold will apply to tax periods beginning on or after 01 June 2023 and ending before or on 31 December 2026.
  
  

4)   Limitations

• Qualifying Free Zone persons are ineligible.
• Multinational enterprises with consolidated group revenue of more than AED 3.15 billion are ineligible.
• Carry forward of tax losses is prohibited.
• Exempt income benefit is not allowed.
  
  

5)   General Anti Abuse Rule “GAAR”

The arrangement will be covered under GAAR if: 

• Artificial separation of the business or business activity;
• However, the total revenue of the entire business or business activity exceeds AED 3 million in any tax period;
• The taxpayer has elected to apply for Small Business Relief.
  
  

6)   Key Takeaways

• UAE entities that are part of MNEs whose group revenue exceeds AED 3.15 million are not entitled to small business relief.
• Any arrangement made to artificially separate the business or business activity to claim small business relief shall be evaluated as per the GAAR.
• MNEs must carefully examine the small business relief entitlement for UAE entities as this will reduce the overall Group tax cost