Abu Dhabi, UAE- 06 April 2023
The Ministry of Finance in the United Arab Emirates (UAE) has issued Ministerial Decision No. 73 of 2023 on Small Business Relief for the purposes of the Corporate Tax Law. This decision is aimed at supporting start-ups and other small or micro businesses by reducing their Corporate Tax burden and compliance costs.
Under the decision, taxable persons that are resident persons can claim Small Business Relief if their revenue in the relevant tax period and previous tax periods is below AED3 million for each tax period. This relief is available for tax periods starting on or after 1 June 2023 and will continue to apply to subsequent tax periods that end before or on 31 December 2026.
However, if the taxable person exceeds the AED3 million revenue threshold in any tax period, then the Small Business Relief will no longer be available. Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups) as defined in Cabinet Decision No. 44 of 2020 on Organizing Reports Submitted by Multinational Companies are also not eligible for Small Business Relief.
The revenue can be determined based on the applicable accounting standards accepted in the UAE. For tax periods where businesses do not elect to apply for Small Business Relief, they will be able to carry forward any incurred Tax Losses and any disallowed Net Interest Expenditure from such tax periods for use in future tax periods in which the Small Business Relief is not elected.
In cases where the Federal Tax Authority (FTA) establishes that taxable persons have artificially separated their business or business activity and the total revenue of the entire business or business activity exceeds AED3 million in any tax period and such persons have elected to apply for Small Business Relief, this would be considered an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the Corporate Tax Law.
All Cabinet Decisions and Ministerial Decisions issued relating to the Corporate Tax Law are available on the Ministry of Finance’s website. This decision will go a long way in supporting the growth of small businesses in the UAE and encouraging entrepreneurship.