Corporate Tax Relief for Small Businesses in the UAE

The UAE’s Ministry of Finance has recently issued a Ministerial Decision for Corporate tax relief for small businesses under the corporate tax law, which will come into effect from June 01, 2023.

A taxable person can claim small business relief in the relevant tax period where their revenue threshold is less than AED 3 Millions for such tax period and previous tax periods. However, this threshold limit shall only continue to apply to subsequent tax periods that end before or on 31 December 2026.

Begins on

Ends on

Applicable (Yes/No)

01 June 2023

31 May 2024

Yes

01 June 2024

31 May 2025

Yes

01 June 2025

31 May 2026

Yes

01 June 2026

31 May 2027

No

01 April 2023

31 March 2024

CT not applicable*

01 April 2024

31 March 2025

Yes

01 April 2025

31 March 2026

Yes

01 April 2026

31 March 2027

No

01 January 2023

31 December 2023

CT not applicable*

01 January 2024

31 December 2024

Yes

01 January 2025

31 December 2025

Yes

01 January 2026

31 December 2026

Yes

01 January 2027

31 December 2027

No

 

*Corporate tax is applicable for tax periods commencing on or after 01 June 2023.

However, the relief will not be available to Constituent members of Multinational Enterprises Groups (MNE), which is inline with the global effective minimum tax rate of 15% under Pillar Two of OECD/G20 Inclusive Framework on BEPS or a qualifying free zone persons.

For the period in which the small business claims such relief, it shall not be entitled to the tax loss reliefs and interest deductions.

If there is an artificial separation of business and the total revenue exceeds AED 3 Million any tax period, then such a person is not eligible to apply for Small Business Relief. Otherwise, this would be considered as an arrangement to obtain a corporate tax advantage covered under the anti-abuse provisions of corporate tax law.

*Corporate tax is applicable for tax periods commencing on or after 01 June 2023.

However, the relief will not be available to Constituent members of Multinational Enterprises Groups (MNE), which is inline with the global effective minimum tax rate of 15% under Pillar Two of OECD/G20 Inclusive Framework on BEPS or a qualifying free zone persons.

For the period in which the small business claims such relief, it shall not be entitled to the tax loss reliefs and interest deductions.

If there is an artificial separation of business and the total revenue exceeds AED 3 Million any tax period, then such a person is not eligible to apply for Small Business Relief. Otherwise, this would be considered as an arrangement to obtain a corporate tax advantage covered under the anti-abuse provisions of corporate tax law.

 

 

  • Mohammed Aadhil , CA Final, B.Com.
  • 20/4/2023