The Ministry of Finance has published the details of Small Business Relief under UAE Corporate Tax in Ministerial Decision No. 73 of 2023. For many small and owner-managed businesses, it will be one of the most important parts of the new regime.
How it works
A resident business that elects for Small Business Relief is treated as having no taxable income for the relevant tax period, so no Corporate Tax is payable. It still needs to register and file a return, and make the election in that return.
Who qualifies
- Resident persons, which includes companies and individuals carrying on business in the UAE.
- Revenue of AED 3 million or less in the relevant tax period and in each previous tax period.
The relief applies to tax periods starting on or after 1 June 2023 and ending on or before 31 December 2026.
Who cannot use it
- Qualifying Free Zone Persons.
- Members of large multinational groups, those with consolidated group revenue of AED 3.15 billion or more.
What you give up
Electing for the relief has consequences. During periods when you use it, tax losses and disallowed net interest cannot be carried forward to later years. A business that expects losses in its early years should consider whether claiming the relief is the best choice.
Splitting a business will not help
The rules include protections against artificially separating a business to keep each part under the revenue threshold. The FTA can deny the relief where that is the main purpose.
What to do now
- Check your revenue for the periods that matter, measured in line with accounting standards.
- Keep proper books. Even with the relief, you need accurate records to prove your revenue and to file your return.
- Model the choice if you expect losses in your first tax periods.
If you would like help assessing whether Small Business Relief is right for your business, please get in touch.
This article is general information based on the rules as we understand them at the date of publication. It is not advice on your circumstances. Laws and practice change, so please speak to us before acting on it.
