Dubai, UAE – UAE’s Ministry of Finance has announced a decision on Small Business Relief (SBR), which is aimed at supporting startups and other small or micro businesses by reducing their corporate tax burden and compliance costs.
The Ministry’s decision stipulates that taxable residents of the UAE can claim SBR when their revenue in the relevant tax period and previous tax periods is below AED3 million for each tax period. This means that once a taxable person exceeds the AED3 million revenue threshold in any tax period, then SBR will no longer be available.
The AED3 million revenue threshold will apply to tax periods starting on or after 1 June 2023 and will only continue to apply to subsequent tax periods that end before or on 31 December 2026. Revenue can be determined based on the applicable accounting standards accepted in the UAE.
The SBR will not be available to Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups) as defined in Cabinet Decision No. 44 of 2020 on Organizing Reports Submitted by Multinational Companies. MNE Groups are groups of companies with operations in more than one country that have consolidated group revenues of more than AED3.15 billion.
In tax periods defined in the decision where businesses do not apply for SBR, they will be able to carry forward any incurred tax losses and any disallowed Net Interest Expenditure from such tax periods, for use in future tax periods in which the SBR is not elected.
The decision specifies that where taxable persons have artificially separated their business or business activity and the total revenue of the entire business or business activity exceeds AED3 million in any tax period and such persons have elected to apply for SBR, this would be considered an attempt to obtain a Corporate Tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the Corporate Tax Law.