Small business relief for corporate tax purposes
CA Ayush Agarwal
Practicing Chartered Accountant | Flipkart & Amazon accounting | CFO Services | Freelancer | Ex-Deloitte EY & PWC
Ministerial Decision No. 73 of 2023 has been issued by the Ministry of Finance to provide relief to small businesses as per the Corporate Tax Law.
This decision aims to reduce the burden of Corporate Tax on small businesses and startups and minimize their compliance costs. Small Business Relief offers a revenue threshold below which the taxable person will be treated as not having derived any taxable income. The decision clarifies the provisions of Tax Losses and disallowed Net Interest Expenditure carried forward under the Small Business Relief scheme.
To claim Small Business Relief, taxable resident persons must have a revenue below AED3 million for each tax period. Once the revenue exceeds the AED3 million threshold, the relief will not be available.
The revenue threshold applies to tax periods starting from June 1, 2023, and ends on or before December 31, 2026. The revenue can be determined based on applicable accounting standards accepted in the UAE. Small Business Relief is not available for Qualifying Free Zone Persons or members of Multinational Enterprises Groups.
Businesses that do not elect to apply for Small Business Relief in a tax period can carry forward their incurred Tax Losses and any disallowed Net Interest Expenditure for use in future tax periods. However, if the Federal Tax Authority determines that taxable persons have artificially separated their business or business activity to obtain Corporate Tax advantage and the total revenue of the entire business or business activity exceeds AED3 million in any tax period, this will be considered an arrangement to obtain Corporate Tax advantage under the general anti-abuse rules of the Corporate Tax Law.