The UAE’s Small Business Relief program is a key initiative under the corporate tax regime designed to support startups and small to medium-sized enterprises (SMEs). It offers a significant benefit: a 0% corporate tax rate, which can free up capital for growth and reduce administrative burdens. Here’s a deep dive into what SMEs need to know about this program.
What is the Small Business Relief Program?
Introduced under Article 21 of the UAE Corporate Tax Law and Ministerial Decision No. 73 of 2023, the program allows qualifying businesses to be treated as having no taxable income for a given tax period. This means they are not required to pay corporate tax. This relief is available for tax periods starting on or after June 1, 2023, and will continue to apply to subsequent tax periods that end on or before December 31, 2026.
Eligibility Criteria
To be eligible for the Small Business Relief, a business must meet all of the following conditions:
- Revenue Threshold: The total revenue must not exceed AED 3 million in the relevant tax period and all previous tax periods ending on or before December 31, 2026. This is a crucial point: if your revenue exceeds this threshold even once, you become ineligible for relief in that year and all subsequent periods.
- Resident Person Status: The business must be a “Resident Person” for corporate tax purposes. This includes:
- Juridical persons (companies) incorporated or effectively managed and controlled in the UAE.
- Natural persons (individuals) conducting a business or business activity in the UAE.
- No MNE Group Affiliation: The business must not be a member of a Multinational Enterprise (MNE) group with consolidated global revenues exceeding AED 3.15 billion.
- Not a Qualifying Free Zone Person: Companies that are “Qualifying Free Zone Persons” are not eligible for this relief, as they already benefit from a 0% corporate tax rate on their qualifying income.
- No Artificial Separation: The Federal Tax Authority (FTA) has anti-abuse rules to prevent businesses from artificially splitting their activities into multiple entities to stay below the AED 3 million revenue threshold.
Key Benefits
The Small Business Relief program provides several advantages beyond just a 0% tax rate:
- Simplified Compliance: Businesses that elect for the relief do not need to calculate their taxable income in detail, making the tax filing process much simpler. This can also reduce the need for expensive tax consultants.
- Improved Cash Flow: By eliminating the corporate tax liability, businesses can retain more capital for reinvestment, expansion, or operational costs.
- Administrative Cost Savings: The simplified compliance requirements and ability to use cash-basis accounting (if applicable) can lead to lower administrative costs.
- No Transfer Pricing Documentation: While the arm’s-length principle for related party transactions still applies, businesses under the relief are not required to prepare transfer pricing documentation.
How to Apply ?
