What is a Small Business Relief in UAE
Small Business Relief provides exemptions to specific businesses, relieving them from the duty of Corporate Tax computation and payment, as well as adherence to standard Corporate Tax reporting obligations.
An eligible Taxable Person, whose revenue does not exceed AED 3 million in the applicable Tax Period ending on or before December 31, 2026, along with prior Tax Periods, can opt for treatment as having no Taxable Income for that specific Tax Period. Consequently, they are exempted from the requirement to compute their Taxable Income or submit a comprehensive Corporate Tax Return
Entities that can Claim for Small Business Relief
For Tax Periods that end on or before 31 December 2026, any of the following UAE Resident Persons with Revenue of AED 3 million or below in the current and previous Tax Periods can claim Small Business Relief:
- A natural person.
- A legal entity that is neither:
– a Constituent Company of a Multinational Enterprise Group as defined in Cabinet Decision No. 44 of 2020 that operates in more than one country and has a total consolidated group revenue of more than AED 3.15 billion in each financial period;
– nor a Qualifying Free Zone Person.
If an eligible Taxable Person’s Revenue exceeds AED 3 million in any Tax Period, they will no longer be eligible for Small Business Relief for that Tax Period and any future Tax Periods.
Corporate Tax UAE Relief on Small Businesses
Enterprises generating revenues of AED 3 million or less in the current and preceding Tax Periods can choose ‘Small Business Relief’ until December 31, 2026.
Opting for this relief exempts a Taxable Person from being assessed for Taxable Income in the relevant Tax Period and simplifies compliance duties. To apply for Small Business Relief, the election must be made in the Taxable Person’s Corporate Tax Return for the relevant Tax Period.
Small Business Relief offers significant benefits to small businesses in the UAE, providing exemptions from Corporate Tax for eligible Resident Taxable Persons, whether natural or juridical, meeting specific revenue criteria. Opting for this relief brings two key advantages:
- Administrative Relief: Eligible entities are relieved from calculating Taxable Income, simplifying tax return filing and record-keeping. They can even adopt the cash basis of accounting for Financial Statements, easing financial management.
- Tax Relief: Businesses choosing Small Business Relief are exempt from paying Corporate Tax on income earned during the Tax Period.
Key details about Small Business Relief:
– Applicable for tax years starting after June 1, 2023.
– The AED 3 million revenue threshold applies to tax periods ending on or before December 31, 2026.
– Businesses can elect for Small Business Relief for a specific tax period by notifying tax authorities.
– Eligible businesses can claim the relief for multiple consecutive tax periods, provided they meet the criteria.
Eligibility Criteria For Small Business Relief
To qualify for Small Business Relief (SBR), a Taxable Person must meet the following criteria:
- Revenue Limit: Revenue should not exceed AED 3,000,000 for the relevant Tax Period and all previous Tax Periods ending on or before December 31, 2026.
- Election Process: The election for SBR must be included within the Tax Return for the respective Tax Period.
Small Business Relief is available to the following resident persons:
- Juridical person incorporated in the UAE, including freezone persons
- Juridical persons incorporated outside the UAE but controlled and managed from UAE
- Any natural person conducting business or related activities in UAE
- Any person as identified by the cabinet under any decision
Ineligibility for Small Business Relief
Ineligibility for Small Business Relief:
Despite its broad application, Small Business Relief has exceptions:
- Members of Multinational Enterprise Groups (MNEs): Companies within an MNE with total consolidated group revenue exceeding AED 3.15 billion are ineligible for SBR.
- Qualifying Free Zone Persons: These individuals already benefit from a 0% Corporate Tax rate on their Qualifying Income, making them ineligible for SBR. However, specific criteria must be met to maintain their status.
Small Business Tax Relief Guidelines
To qualify for Small Business Relief (SBR), a business must adhere to the following criteria:
- Residency: The business must be a resident entity in the UAE.
- Revenue Threshold: Its revenue for the relevant tax period and preceding tax periods must not exceed AED 3 million.
- Exclusions: The business cannot be a financial institution or a holding company.
If a business meets the eligibility requirements for SBR, it will be exempt from Corporate Tax (CT) on its profits. Additionally, it will benefit from reduced compliance obligations, including simplified transfer pricing regulations.
In essence, Small Business Relief serves as a valuable tax incentive for small enterprises in the UAE. By alleviating the tax burden, it fosters a conducive environment for small businesses to flourish and expand. The aim of this relief measure is to support local businesses with modest annual revenues, enhancing their competitiveness and sustainability. However, businesses should conduct thorough assessments to determine the viability of claiming the relief in each tax period, considering factors such as taxable profits, interest expenses, and available tax reliefs.
Unicorn Global Solutions' Role
If you’re a small business in the UAE seeking insights into Small Business Relief, contact Unicorn Global Solutions today. We’ll assist in understanding your tax obligations and maximizing available tax reliefs. Our tailored accounting and auditing services are at your disposal. Connect with us now to explore further. Text us on WhatsApp or call us today.
