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Ultimate Guide For Small Business Tax Relief



The Small Business Relief (SBR) is a provision under the UAE Corporate Tax Law that allows eligible small businesses to benefit from simplified compliance requirements and potential tax exemptions. This initiative is designed to ease the tax burden on startups and small enterprises, encouraging business growth and economic development.


Key Features of Small Business Relief


1. Eligibility Criteria


A business can qualify for Small Business Relief if:

• Its revenue does not exceed AED 3 million for the relevant tax period and previous tax periods.

• It is a resident taxable person in the UAE.

• It is not part of a multinational enterprise (MNE) group or a qualifying free zone entity.


This means that businesses with annual revenues of AED 3 million or less can opt for Small Business Relief, provided they meet all conditions.


2. Tax Exemption


Eligible businesses that elect for Small Business Relief will be treated as having zero taxable income for the applicable tax period, meaning they will not be required to pay Corporate Tax (which is otherwise set at 9% for taxable income exceeding AED 375,000).


3. Duration of Relief


The Small Business Relief is available for tax periods starting on or after June 1, 2023, and ending before or on December 31, 2026.


4. Simplified Compliance Requirements


• Businesses under this relief do not need to calculate taxable income.

• They are exempt from detailed transfer pricing documentation requirements unless there are significant related-party transactions.

• However, they must still file a tax return to claim the relief.


Exclusions and Limitations


Some businesses do not qualify for Small Business Relief, including:

1. Multinational Enterprise (MNE) Groups – Companies that are part of an MNE group with consolidated global revenues exceeding AED 3.15 billion.

2. Qualifying Free Zone Entities – Businesses that already benefit from tax incentives under the UAE Free Zone Corporate Tax regime.

3. Artificial Separation of Businesses – If a business deliberately splits operations into smaller entities to qualify for relief, the Federal Tax Authority (FTA) may deny the relief under the General Anti-Abuse Rules (GAAR).


Key Benefits of Small Business Relief


No Corporate Tax for qualifying businesses.

Reduced Administrative Burden with simplified compliance.

Encourages Growth by allowing small businesses to reinvest profits.

Supports Startups and SMEs in adapting to the new tax regime.


Conclusion


The Small Business Relief under UAE Corporate Tax is a strategic measure to support small businesses and startups by reducing their tax liabilities and compliance obligations. However, businesses should carefully assess their eligibility and ensure compliance with FTA requirements to benefit from this relief without penalties.


If you are a small business owner in the UAE, consult us to determine whether your business qualify and how best to leverage this tax incentive.


DISCLAMER: The above text should not be treated as a tax advise you may rely on. You should consult with your tax advisor to address your facts and circumstances.

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