Small Business Relief aims to support small businesses operating in the UAE for Corporate Tax purposes, easing their transition into the Corporate Tax regime. This initiative seeks to alleviate the compliance burdens faced by small businesses, particularly during the initial stages of implementing the Corporate Tax regime. By offering relief, small businesses are relieved from the responsibility of calculating and paying Corporate Tax, making the process more manageable for them.
Any eligible Taxable Person, whether a Natural Person or a Juridical Person, who is a Resident Taxable Person, can take advantage of Small Business Relief if their revenue for a given Tax Period, as well as all prior Tax Periods ending on or before December 31, 2026, does not exceed AED 3,000,000. Under this relief, these small businesses have the option to be considered as having no Taxable Income for that specific period. As a result, they are not required to calculate their Taxable Income or complete a comprehensive Tax Return.
Revenue Threshold:
To qualify for Small Business Relief, a Taxable Person must have revenue below or equal to AED 3,000,000 for the current tax period and all previous periods. However, if the revenue exceeds AED 3,000,000 in a specific tax period, the Taxable Person will no longer be eligible for Small Business Relief. Even if the revenue falls below the AED 3,000,000 threshold in subsequent tax periods, the Taxable Person cannot elect for Small Business Relief.
Revenue Definition:
According to the Corporate Tax Law, revenue is defined as the total income a business earns during a specific tax period. This includes income from sales and any other gross income received, such as income from selling assets. It’s important to note that revenue is distinct from profit, which is the difference between a business’ revenue and its costs. Eligibility for Small Business Relief is not influenced by the amount of profit a business generates. When determining revenue, it should be calculated based on the arm’s length principle, which means it should reflect fair market value and be in line with comparable transactions.
Eligibility Criteria:
Small Business Relief is a benefit provided to UAE Resident Persons whose revenue does not exceed AED 3,000,000 for the current tax period and all prior tax periods. However, there are two exceptions to this criterion:
- If the business is a member of a Multinational Enterprise Group (MNE).
- If the business is a Qualifying Free Zone Person.
How does Small Business Relief work?
Small Business Relief allows eligible Resident Persons to choose not to have any Taxable Income in a specific Tax Period if their Revenue is AED 3,000,000 or less for that period and all previous periods ending on or before December 31, 2026. As a result, they will not have to pay any Corporate Tax. The extent of Corporate Tax relief depends on the profitability of the business. Without the relief, Corporate Tax would be paid at a rate of 0% on Taxable Income up to AED 375,000, and 9% on Taxable Income above AED 375,000. Therefore, the amount of relief enjoyed by businesses that elect for Small Business Relief is proportional to their profitability.
Need More Information?
Contact ProAct Chartered Accountants for more information. We are happy to assist.