UAE to introduce a corporate tax relief scheme for small businesses
Here’s all you need to know…
The Ministry of Finance has announced that small businesses in the UAE, earning less than Dhs3 million, are eligible for the corporate tax relief scheme, starting June 1, 2023.
The Small Business Relief was established to assist small and micro business owners, start-ups, and freelancers by lowering their corporate tax obligations and compliance expenses.
Ministry of Finance Issues Decision on Small Business Relief for Corporate Tax Purposes.
— UAE BARQ (@UAE_BARQ_EN) April 6, 2023
Who can apply?
UAE residents with small businesses can claim tax relief when their revenue is below Dhs3 million (USD816,880), per tax year.
The scheme does not apply to businesses in free zones or members of multinational enterprise groups.
The threshold tax period will start on June 1, 2023, and continue till December 31, 2026.
How does it work?
The Small Business Relief programme has been implemented in compliance with Article 21 of the corporate tax law, which “treats the taxable person as not having derived any taxable income in a given tax period where the revenue did not exceed a certain threshold.”
Revenue can be determined based on the applicable accounting standards accepted in the UAE.
The corporation tax law, which was published last year and set the basic rate at nine per cent, will take effect for companies whose fiscal year begins on or after June 1 of this year. The federal corporate tax law affects companies that have an income exceeding Dhs375,00.
The initiative also allows businesses that do not apply for Small Business Relief during the tax periods defined in the Ministerial Decision, to carry forward any incurred tax losses and any disallowed net interest expenditure from those tax periods for use in future tax periods.