UAE Introduces New Tax Regulations for Small Businesses

UAE unveils tax relief for eligible small businesses with revenues below AED3 million

The UAE Ministry of Finance has announced new tax guidelines affecting businesses with revenues of AED3 million or less. These businesses will be eligible for “Small Business Relief,” provided their revenues remain below the AED3 million threshold for each tax period. The new rules will be applicable to tax periods starting on or after June 1, 2023, and ending on or before December 31, 2026.

Revenues will be determined according to the accounting standards accepted in the Emirates. The relief is in line with Article 21 of the Corporate Tax Law, which states that if a taxable person’s revenue does not surpass a specific threshold, they will not be considered as having any taxable income in that tax period.

However, Small Business Relief will not be available for Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups), as outlined in Cabinet Decision No. 44 of 2020. MNE Groups are defined as companies operating in more than one country with consolidated group revenues exceeding AED3.15 billion.

Businesses not electing to apply for relief can carry forward any tax losses and disallowed net interest expenditures incurred during tax periods where the relief is not elected. The Ministry of Finance warned that if the Federal Tax Authority (FTA) finds that taxable persons have artificially divided their business to exceed the AED3 million threshold while applying for Small Business Relief, it will be considered an attempt to gain a Corporate Tax advantage under Article 50’s general anti-abuse rules of the Corporate Tax Law.

For more information on how this could affect your business, contact Alpadis Group.