UAE Taxation – Small business relief
A key component of the corporate tax legislation in the UAE is the “Small Business Relief”. Given the fair amount of “opinions” out in the open the Affinitas team has committed to bring some clarity to ensure that this component of the tax legislation is appreciated for its benefits and potential challenges.
Small Business Relief is provided to small Businesses resident for Corporate Tax purposes in the UAE to ease their implementation of the Corporate Tax regime.
In order to elect for Small Business Relief, an eligible Taxable Person’s Revenue must be below or equal to AED 3,000,000 for the relevant Tax Period and all previous Tax Periods. Where a Taxable Person’s Revenue exceeds AED 3,000,000 in a Tax Period, the Taxable Person will no longer be able to elect for Small Business Relief, even if its Revenue is equal to or falls below the AED 3,000,000 threshold in subsequent Tax Periods.
Who is NOT eligible for Small Business Relief?
- Where the business is a member of a Multinational Enterprise Group (MNE);
MNEs are groups of companies that operate in more than one country and that have a total consolidated group revenue of more than AED 3.15 billion and are required to prepare a Country-by-Country Report under the UAE’s Country-by-Country Reporting legislation
- Where the business is a Qualifying Free Zone Person:
Small Business Relief will not be available to Qualifying Free Zone Persons. Qualifying Free Zone Persons already benefit from a 0% Corporate Tax rate on their Qualifying Income.
A Qualifying Free Zone Person is a Free Zone Person that:
- Maintains adequate substance in the UAE;
- Derives Qualifying Income as specified in the relevant Cabinet Decision;
- Has not elected to be subject to Corporate Tax;
- Complies with the requirements under the Arm’s Length Principle and transfer pricing documentation; and
- Meets the following other conditions prescribed by the Minister;
− The non-qualifying Revenue derived by the Qualifying Free Zone Person in a Tax Period does not exceed 5% (five percent) of the total Revenue of the Qualifying Free Zone Person in that Tax Period or AED 5,000,000 (five million dirhams), whichever is lower; and
− Prepares audited financial statements.
| If election for Small Business Relief is made | If no election for Small Business Relief is made | |
| Required to register for Corporate Tax | ✔ | ✔ |
| Required to file a full Tax Return | ✘ | ✔ |
| Can file a simplified Tax Return | ✔ | ✘ |
| Required to calculate Taxable Income | ✘ | ✔ |
| No Corporate Tax to pay | ✔ | Depends on the level of Taxable Income |
| Subject to meeting necessary conditions: | ||
| - Can accrue and utilise Tax Losses for the relevant Tax Period | ✘ | ✔ |
| - Can accrue and utilise Excess Interest Expenditure for the relevant Tax Period | ✘ | ✔ |
| - Can carry forward Tax Losses and Excess Interest Expenditure from previous Tax Periods | ✔ | ✔ |
| - Can apply reliefs for transfers within a Qualifying Group or for Business restructuring transactions | ✘ | ✔ |
| - Must comply with transfer pricing documentation requirements | ✘ | ✔ |
| - Must comply with the Arm's Length Principle | ✔ | ✔ |
Partner with Affinitas DMCC
Navigating the complexities of the new UAE Corporate Tax regime requires expert guidance. Affinitas DMCC offers comprehensive support to help your business comply with tax regulations and optimize financial management.
Affinitas DMCC: Your Partner in Taxation
Navigating the complexities of taxation can be daunting. Affinitas DMCC offers comprehensive HR solutions to help businesses achieve their goals:
- Compliance Support: Ensure your business adheres to all Emiratisation regulations and documentation requirements.
- Accounting Services Tax consultancy and accounting services are what we do best. We provide tax consultancy and accounting services throughout the UAE to individuals, small & medium sized businesses and corporate entities.
- Tax Advisory: Tax Minimization across multiple jurisdictions
- Private Equity Advisory Service: Mergers, Acquisitions, and Investments in International and Emerging Markets are Cornerstones of Affinitas’ Expertise
Contact Us
For personalized assistance and more information on the UAE Free Zone tax, contact Affinitas DMCC. Our team of experts is dedicated to helping your business thrive in the UAE's dynamic business environment.
