Small Business Relief For Corporate Tax

According to the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law), the Ministry of Finance (MoF) issued Ministerial Decision No. 73 of 2023 on Relief for Small Businesses.

A decision is made in accordance with Article 21 of the Corporate Tax Law, which treats taxable persons as not having derived any taxable income if they do not exceed a certain threshold.

By reducing the burden of corporate tax on start-ups and other small and micro businesses, Small Business Relief is intended to assist them. However, according to the Ministerial Decision on Small Business Relief, a taxable person can elect for Small Business Relief only if they reach the specified revenue threshold and satisfy the other conditions. As a result, the provisions of the carried forward tax losses were clarified, as was the disallowance of net interest expenditure under the Small Business Relief scheme.

According to the Ministerial Decision on Small Business Relief:

1. Taxable persons who are residents are eligible for Small Business Relief if their revenue in the previous and relevant tax period was below AED3 million. As a result, once a taxable person reaches AED3 million in revenue in a given tax year, the Small Business Relief will be unavailable.
2. Revenue thresholds of AED3 million will be applicable to tax periods beginning on or after 1st June 2023. They will continue to apply to subsequent tax periods ending before 31st December 2026.
3. According to UAE accepted accounting standards, revenue can be determined.
4. As per Cabinet Decision No. 44 of 2020 on Organizing Reports Submitted by Multinational Companies, the Small Business Relief program will not be available to Qualifying Free Zone Persons  or Multinational Enterprise Groups (MNE Groups) members. MNE groups are companies operating in more than one country whose combined revenues exceed AED3.15 billion.
5. Businesses who does not elect to apply for Small Business Relief on a specific tax period will be able to carry forward any incurred Tax Losses and any disallowed Net Interest Expenditure from the relevant tax period
6. In regard to artificial separation of business, the Ministerial Decision specifies that taxable persons can apply for Small Business Relief if the Federal Tax Authority (FTA) establishes that taxable persons have artificially separated their business activities and their total revenue exceeds AED 3 million for any tax period. In this case, clause (1) of Article 50 regarding the general anti-abuse rules of corporate tax law would apply to obtain a Corporate Tax advantage.

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