MoF announces Relief for Small Businesses from Corporate Tax UAE

According to Corporate Tax Law released in 2022, the government notified about small business relief for corporate tax of how a Taxable Person that is a Resident Person may elect to be treated as not having derived any Taxable Income for a Tax Period. The law has the following details mentioned about being eligible to claim Small Business Relief,

• The Revenue of the Taxable Person for the relevant Tax Period and previous Tax Periods should not exceed a threshold set by the Ministry of Finance.
• The Taxable Person meets all other conditions prescribed by the Minister. 

Now,  The Ministry of Finance (MoF) has issued Decision No. 73 of 2023 on Small Business Relief for the Corporate Tax Law about its eligibility and claim of it. The Ministry of Finance had finalized the decision on Small Business Relief, whereby the taxable person had not derived a taxable income in a particular tax period when the revenue did not exceed a certain margin.

The ultimate goal of Small Business Relief is to support startups and similar micro businesses by minimizing their Corporate Tax liabilities and compliance expenses.  The Cabinet Decision has mentioned the revenue margin and conditions for a taxable person to choose Small Business Relief and communicated the provisions of the Tax losses that were carried forward, and banned the Net Interest Expenditure under this scheme.

Here are the key takeaways from the new announcement from MoF on Small Business Relief for UAE Corporate Tax. Read below to know the full details. 

The Cabinet Decision has identified the following on Small Business Relief:

• Taxable persons that were residents of the country could claim this scheme wherein their revenue in the specific tax period and the earlier tax periods below AED3 million for every tax period, which meant that the taxable person who crossed this revenue margin in any tax period would no longer be eligible for Small Business Relief scheme.
• The revenue margin of AED 3 million would affect tax periods on or after June 2023 and be applied to other tax periods until December 2023.
• Revenue could be assessed as per the accounting standards approved in the UAE.
• The Small Business Relief would not be accessible to certain Free Zone Persons or the members of Multinational Enterprise Groups (MNE Groups) as declared by Cabinet Decision. 
• In tax periods, declared in Cabinet Decision, where businesses did not apply for Small Business Relief, they would be eligible to carry forward the incurred Tax Losses and those banned Net Interest Expenditures from tax periods for future tax periods wherein the scheme was not chosen. 
• According to the artificial separation of the business, Cabinet Decision communicated the FTA’s declaration about taxable persons who had artificially separated their business or business activity and the total revenue of the entire business or business activity exceeded AED3 million in a tax period and those persons had chosen to apply for Small Business Relief, would be considered to obtain a Corporate Tax advantage, under the anti-abuse regulations of Corporate Tax Law. 

We, BMS Auditing Recommend you get ready for the UAE Corporate Tax starting from June 1, 2023. We have the FTA Registered Tax agents who offer the best corporate tax services in UAE and assist you in implementing corporate tax to your business. 

Contact BMS Auditing Dubai for Corporate Tax assistance.