Alchemist- An accounting and consulting firm for your assistance.

Small Business Relief for UAE Corporate Tax

global

The ministry of finance has a new update regarding small business relief for the purpose of corporate tax. This is made to support small businesses and temporarily take away the burden of corporate tax from them. The new update comes under Ministerial Decision No. 73 of 2023 dated 03 April 2023 (‘SBR Decision') on Small Business Relief for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (‘UAE CT Law’).

This means that small businesses and startups will be getting support from the UAE government as part of the small business relief. So, what is the criteria to qualify for small business relief? We will take a look at the aspects and conditions of this new amendment

Definition for a small business- For the purpose of corporate tax, a small business means a business whose taxable revenue in the relevant tax periods and the previous tax periods is less than AED 3,000,000.
Applicable period for small business relief for corporate tax purposes- It is applicable for tax periods starting from 01 June 2023 to 31 December 2026. During the span of this period if the business crosses the set threshold revenue of AED 3 million then it loses its qualification to apply for small relief for the current and the tax periods coming after that.
Method of calculation of revenue- The applicable accounting standards (IFRS) should be used to calculate the revenue of the business for it to considered valid. Businesses should take assistance from accounting experts to make sure that they can claim for small business relief.
Small business relief is not applicable for some of the businesses like Qualifying Free Zone persons or members of MNE groups (Multinational Enterprise Groups) which is already defined in cabinet decision No. 44 of 2020 on organizing reports produced by the multinational companies. These MNE groups are group of companies which have group revenue of more than AED 3.15 billion and operates in more than one country.
Any tax losses that occurred during the tax period in which the company decided to apply for small business relief cannot be carried forward to the next tax period. As for any unutilized tax losses when the company has not elected the small business relief, they will be subject to Article 37 of the corporate tax law and can be carried forward to the next tax period in which the business has not selected the small business relief.
As for Next Interest Expenditure in a tax period in which the company has selected to opt for Small business relief, it cannot be carried forward to the next tax periods. Similar to Unutilized tax losses, Net Interest Expenditure it can be carried forward to the next tax period in which the business has not selected the small business relief and will be subject to Article 30 of the corporate tax law.
In case the authority determines that a taxable person has artificially separated their business or business activity and the amount of revenue of the entire business or business activity crosses the threshold revenue of AED 3 million, then it will be considered an arrangement to obtain Corporate Tax advantage under clause (1) of Article 50 regarding the General Anti Abusive Rules (GAAR) of the Corporate Tax Law

This is the general idea of the new update regarding the corporate tax law, to ensure that you get the maximum benefits of this decision your accounting has to be kept at the standard that the decision demands, and hence you need a trustworthy accounting expert who can plan your accounting and keep it at IFRS standards.

Alchemist Accounting is well equipped with a team of experts who can best assist in your corporate tax and accounting needs. We are guided by the principles of trust and efficiency and will provide you with the excellent service that you deserve. To get a free consultation reach out at +971582660929 and talk to our experts.