Introduction
The Ministry of Finance in the UAE recently introduced Ministerial Decision No. 73 of 2023 on Small Business Relief ("Small Business Relief") for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses ("Corporate Tax Law"). This relief aims to ease the compliance burden for start-ups and small businesses. This blog will outline the relief's key aspects of the relif for UAE small businesses.
Key considerations for businesses
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Eligibility: UAE resident taxable persons with revenue below AED 3 million for the relevant tax period and previous tax years can claim the relief. It does not apply to qualifying free zone persons or multinational enterprises with consolidated group revenues over AED 3.15 billion.
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Applicability: The AED 3 million revenue threshold is valid for tax periods starting on or after June 2023, and up to tax periods ending on or before 31 December 2026.
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Carry-forward Provisions: In the tax periods where the eligible business has not elected to apply for the Small Business Relief, the business can carry forward any tax losses and disallowed net interest expenditure from such tax periods for use in future tax periods where the relief is not elected.
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Anti-abuse Rules: General anti-abuse rules (GAAR) apply to businesses that attempt artificial separation to benefit from the small business relief.
Election Process
A taxable person, if eligible, must make an electection to claim the Small Business Relief for each relevant tax period to be treated as not having derived any taxable income.
Additional information regarding the process to make the election is not yet available.
Conclusion
Small Business Relief is a significant development for UAE start-ups and small businesses.
However, one area of uncertainty is whether or not small businesses claiming the relief must file a nil corporate tax return. It is advisable to assume that such businesses are considered "taxable persons" under the Corporate Tax Law and should submit a nil corporate tax return, in line with information previously provided by the Federal Tax Authority.
HSBM Global is committed to helping you navigate the UAE tax landscape, offering expert accounting and tax services to keep your business compliant. We would be pleased to assist you in filing your corporate tax returns in UAE.
Email us at tax@hsbmglobal.com for assistance.