Small Business Relief under the UAE Corporate Tax Law
- What is Small Business Relief?
Small Business Relief is an optional provision under the UAE Corporate Tax Law.
It aims to reduce the tax and administrative burden on small businesses, especially in the initial
phases of tax implementation.
- Who is Eligible?
To be eligible for the Small Business Relief, an individual or legal entity must meet the following
conditions:
– Be a resident for corporate tax purposes.
– Have revenue not exceeding AED 3,000,000 during the relevant and previous tax periods.
– Not be a member of a Multinational Enterprise Group (MNE Group).
– Not be a Qualifying Free Zone Person.
– Not have artificially separated business activities to qualify.
- Benefits of Electing Small Business Relief
– Exemption from calculating and paying corporate tax (if no taxable income is earned).
– Submission of a simplified tax return.
– Exemption from maintaining transfer pricing documentation.
– Option to prepare financial statements using the cash basis of accounting.
- Limitations and Consequences
– Cannot use or carry forward tax losses or net interest expenses during relief periods.
– Losses from the relief period cannot be used in future periods.
– Cannot transfer assets within a qualifying group or perform business restructuring.
– If revenue exceeds AED 3 million in any period, eligibility is permanently lost.
- How to Apply
- The person must be registered for corporate tax.
- The election must be made in the tax return for each applicable period.
- The taxpayer must retain records proving eligibility.
- Practical Examples
– A small company earning less than AED 3 million in all previous tax periods may elect the relief.
– A one-time large sale that pushes revenue above AED 3 million makes the entity ineligible
permanently.
– Non-residents and Free Zone Qualifying Persons are not eligible to elect the relief.
