The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
The United Arab Emirates (UAE) has introduced a new corporate tax regime, governed by Cabinet Decision No. 60 of 2023, which aims to promote business growth and investment in the country. As part of this regime, the Small Business Relief (SBR) mechanism has been established to provide tax relief to eligible small businesses. SBR is designed to support small businesses by reducing their tax burden, allowing them to retain more of their profits and reinvest them in their operations. By providing tax relief to eligible small businesses, the UAE government aims to foster entrepreneurship, innovation, and economic growth in the country.
What is Small Business Relief?
Small Business Relief (SBR) is a tax relief mechanism that allows eligible small businesses to be exempt from paying corporate tax or to be subject to a reduced tax rate. The Small Business Relief allows eligible businesses in the UAE to be treated as if they have no taxable income, thereby exempting them from paying corporate tax.
Who is Eligible for Small Business Relief?
To be eligible for SBR, a business must meet the following criteria:
- Taxable income : The business's taxable income must not exceed a specified threshold (AED 375,000).
- Not a member of a multinational enterprise group : The business must not be a member of a multinational enterprise group.
- Not a Qualifying Free Zone Person : The business must not be a Qualifying Free Zone Person.
How to Apply for Small Business Relief?
To benefit from Small Business Relief under the UAE Corporate Tax law, eligible businesses must actively elect the relief when filing their Corporate Tax Return, as it is not automatic. This means you must make the selection yourself during the submission process.
When submitting your Corporate Tax Return, ensure that you:
- Select “Small Business Relief” in your tax return for the relevant tax period.
- Report your revenue accurately in line with applicable UAE accounting standards.
Failing to elect the relief on your return means you cannot apply it retroactively for that tax period, even if you meet the eligibility criteria.
Benefits of Small Business Relief
No Corporate Tax
- If you're running a small business, the introduction of Corporate Tax in UAE might sound overwhelming, but there’s good news. Thanks to the Small Business Relief scheme, qualifying businesses are treated as if they have no taxable income.
- That means 0% corporate tax, giving you one less thing to worry about and more freedom to reinvest in your growth.
Simplified Return Filing
- One of the most important advantages for corporations under Corporate Tax in Dubai and the rest of the UAE is a simplified compliance process.
- Small companies benefit from less documentation work and a simpler tax return process, so they can concentrate more on development and operations and less on complicated tax filings.
Which Person Does Not Qualify for Small Business Relief?
The following persons do not qualify for SBR:
- Member of Multinational Enterprise Group (MNE) : Businesses that are part of a multinational enterprise group are not eligible for SBR.
- Qualifying Free Zone Person : Businesses that are Qualifying Free Zone Persons are not eligible for SBR, as they are subject to a different tax regime.
Documents Required for Small Business Relief
To claim Small Business Relief (SBR) in the UAE, businesses may need to provide the following documents:
- Financial statements : Audited financial statements or tax returns showing taxable income.
- Business license : A copy of the business license or registration certificate.
- Tax registration certificate : A copy of the tax registration certificate.
- Other supporting documents : Additional documents may be required to support the SBR claim, such as proof of business income and expenses.
How Can Reyson Badger Help You?
Reyson Badger, a leading tax consultancy firm in the UAE, can assist businesses in claiming Small Business Relief by:
- Determining eligibility : Assessing whether a business meets the eligibility criteria for SBR.
- Preparing and submitting documents : Assisting with the preparation and submission of required documents.
- Ensuring compliance : Ensuring compliance with UAE tax laws and regulations.
