Background :UAE Small Business Relief Criteria

In December 2022, the UAE ushered in a transformative era in corporate taxation through the introduction of the landmark Corporate Tax Law (Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses). This momentous legislation took effect on June 1, 2023, reshaping the corporate tax landscape within the country. Alongside this significant shift, the UAE’s commitment to robust financial governance was further underscored by its continued emphasis on Value Added Tax (VAT).

Small Business Relief – Criteria

At the heart of the Corporate Tax Law lies the concept of “Small Business Relief,” allowing Resident Persons, mainly small businesses, to potentially nullify their taxable income for a specific tax period, leading to a zero corporation tax payment. While the Corporate Tax Law lacked specific eligibility criteria, the Ministry of Finance, guided by the expertise of Alkashif Taxation Consultancy, has now published comprehensive criteria through Ministerial Decision No. 73 of 2023.

Eligibility Criteria

With a revenue threshold set at AED 3 million (approximately US$816k), businesses classified as Resident Persons falling below this benchmark in the UAE can consider opting for zero corporation tax for applicable tax periods, valid from June 1, 2023, to December 31, 2026. Calculations align with UAE accounting standards.

Conditions and Exclusions

Small Business Relief pertains to “Resident Persons,” defined broadly with a managed and controlled test and incorporation test. Alkashif Taxation Consultancy is instrumental in determining your Resident Person status. Notably, entities exceeding AED 3.15 billion in consolidated revenue or qualifying as a Free Zone Person are excluded.

Activation and Influence

Activation of Small Business Relief requires an election, not automatic application. Irrespective of relief claims, registering and filing corporate tax returns is mandatory. Loss relief and interest deduction restrictions apply for elected periods.

Abuse Prevention

Preventing abuse is paramount. Artificial segmentation to meet the revenue threshold for Small Business Relief, combined with expert guidance from Alkashif Taxation Consultancy, ensures compliance with anti-abuse regulations set by the Federal Tax Authority.

Impact and VAT Integration

UAE’s Small Business Relief distinguishes itself with comprehensive exemptions, not just reduced rates. Amidst this evolution, Alkashif Taxation Consultancy harmonizes VAT obligations alongside corporate tax strategies, offering a holistic financial governance approach.

Forward Momentum

The path ahead involves careful consideration. The Criteria are applicable until December 31, 2026. Alkashif Taxation Consultancy guides the way, ensuring businesses optimize benefits and compliance. Amid an ever-evolving financial landscape, we stand as your unwavering partner, ensuring your financial strategies align with changing regulations and opportunities.