Introduction:

The introduction of the Small Business Relief under Article 21 of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) aims to support small businesses by exempting them from corporate tax obligations, provided they meet specific criteria. This relief is particularly significant as it allows small enterprises to flourish without the burden of taxation, promoting a more favourable environment for entrepreneurship and economic growth. 

Overview of Small Business Relief

Small Business Relief allows qualifying resident taxable persons to be treated as if they have not derived any taxable income for a tax period if their revenue does not exceed AED 3 million. This provision is particularly beneficial for small enterprises, enabling them to focus on growth and operational efficiency without the added pressure of corporate tax obligations.

Key Features of Small Business Relief

Eligibility Criteria: To qualify for Small Business Relief under Article 21, a business must meet specific criteria:

Revenue Limit: The total revenue must not exceed AED 3 million for the relevant tax period and all previous tax periods.

Business Type: The relief applies to various types of entities, including:

Impact on Other Corporate Tax Rules: While Small Business Relief provides significant benefits, it also comes with limitations:

Inapplicability of Other Tax Provisions: Businesses that elect for Small Business Relief cannot apply certain other corporate tax reliefs such as:

Verification Measures: The FTA retains the right to verify compliance with eligibility criteria and may request relevant information from businesses claiming this relief.

General Anti-Abuse Rule (GAAR): Under Article 50 of the Corporate Tax Law, if businesses artificially separate their activities to qualify for Small Business Relief while exceeding the revenue threshold collectively, they may face adjustments to their corporate tax liabilities.

Ministerial Decision No. 73 of 2023 on Small Business Relief for the Purposes of Federal Decree-Law No. 47/2022 on the Taxation of Corporations and Businesses

Further clarifying the provisions of Small Business Relief, Ministerial Decision No. 73 of 2023 outlines specific conditions under which businesses can claim this exemption:

Conclusion:

The Small Business Relief provision under the Federal Decree-Law No. 47/2022 is a strategic initiative designed to foster growth among small businesses in the UAE. By reducing their tax burden and simplifying compliance processes, this relief allows small enterprises to thrive in a competitive market environment. As businesses evaluate their eligibility and consider claiming this relief, they must carefully assess its implications on their overall financial strategies and compliance obligations.