Small Business Tax Relief Under UAE CT
The UAE government made new tax rules in June 2023. The Corporate Tax (CT) law now makes businesses pay tax on their net profits. But the UAE wants small businesses to grow, so it offers Small Business Relief. This rule gives small firms a big break. If your company is small, you may not have to pay tax for a while. Let’s see what this means and how your business can benefit from this relief.
Overview of CT and Its Impact on Small Businesses in UAE
Small Business Relief changes the game for small businesses in the UAE. It gives big advantages for businesses that meet the rules:
- Administrative Relief: If a business qualifies, it does not have to calculate Taxable Income. This makes filing tax returns and keeping records much simpler. Owners can use the cash basis of accounting, which is easy for most small firms.
- Tax Relief: Businesses that elect this option will not pay any Corporate Tax for that tax period. That means you keep more of your profits!
Some facts to know:
- The relief starts from tax years after June 1, 2023.
- The revenue limit is AED 3 million. If you go over this, you lose the relief for future years.
- You can claim Small Business Relief for each year you qualify, by telling the tax authority.
Eligibility Criteria for Small Business Relief
A business needs to meet all of these points to get Small Business Relief:
- The revenue must be AED 3 million or less for the current tax period and all past tax periods before 31 December 2026.
- The business must make an official choice for the relief inside its tax return.
- Only these people or companies can get it:
- Any company made in the UAE, including free zone companies
- Any company made outside the UAE but controlled and managed from the UAE
- Any natural person (like a freelancer or shop owner) doing business in the UAE
- Any other person if the government says so
Who Can’t Get Small Business Relief?
Not every business can claim this break. Some are left out:
- Multinational Groups: If you belong to a big group with more than AED 3.15 billion total global revenue, you can’t get Small Business Relief.
- Qualifying Free Zone Persons: Some free zone companies already get a 0% Corporate Tax rate, so they can’t get this relief.
- Financial Institutions or Holding Companies: These companies are not allowed to use this tax break.
How Does Small Business Relief Work?
If a business qualifies, it will be treated as if it earned no taxable income that year. That means no Corporate Tax needs to be paid. Businesses do not have to calculate profits for tax, making life much simpler.
But, if you choose Small Business Relief, you must follow special rules:
- You can’t use Tax Loss Rules in the relief year.
- You can’t use General Interest Deduction Limitation Rules in the relief year.
Key points to remember:
- If your revenue goes above AED 3 million, you lose relief for future years.
- You need to check your eligibility each year.
Other Rules and Important Points
There are some important things businesses must know:
- You must keep your records clear and honest for the FTA.
- You must make your tax return every year, even if you get relief.
- The FTA can check your records to see if you qualify.
- If you break the rules, the FTA can take away your relief.
Small Business Tax Relief Measures
To sum up, a business must:
- Be a resident in the UAE.
- Have revenue not more than AED 3 million for the year and for every year before.
- Not be a financial institution or holding company.
If you follow the rules, you get:
- No CT to pay for that year.
- Simpler compliance (like less strict transfer pricing).
Is Small Business Relief Right for You?
This relief helps many small companies pay less tax and keep more profit. It also cuts paperwork. But every business should think about its own situation first. Sometimes, using the relief means you can’t use other tax breaks. It’s good to ask for help from experts.
How Mubarak Al Ketbi (MAK) Auditing Can Help
Mubarak Al Ketbi (MAK) Auditing helps you understand your tax rights and make the most of every relief. Our experts use simple language to guide you at every step. We’ll help you avoid mistakes, save money, and focus on growing your business. Remember, “a stitch in time saves nine”—so let’s fix your tax problems early!
- For more information, visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates - Or contact/WhatsApp: +971 50 276 2132
