UAE to offer corporate tax relief to small businesses
UAE will provide small firms with corporate tax savings if they generate $816,880 or less.?
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A new corporation tax relief scheme is available to UAE small enterprises with sales of Dh3 million ($816,880) or less, the UAE's Ministry of Finance announced on Thursday.?
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According to Article 21 of the corporation tax code, "which deems the taxable person as not having generated any taxable income in a certain tax period if the revenue did not exceed a certain threshold," the ministerial decision on small business relief was made.?
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The federal company tax, which the UAE adopted last year and has a basic statutory rate of 9%, will take effect for companies whose fiscal year begins on or after June 1 this year.?
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The nation's federal corporation tax reform, which went into effect in December, added income from businesses surpassing Dh375,000 ($102,000) to the corporate tax tier.?
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The government stated that Small Business Relief aims to assist start-ups and other small or micro firms by lessening their corporate tax load and compliance expenditures.?
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It outlines the criteria for a taxable person to qualify for the programme, including the revenue threshold.?
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Taxable individuals who reside in the nation and whose revenue in the pertinent and prior tax periods was less than Dh3 million for each period are eligible to apply for Small Business Relief.?
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A taxable person will no longer qualify for the programme once they reach that amount in any tax season.?
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Only subsequent tax periods that conclude before or on December 31, 2026, will the threshold continue to be applicable. It will begin to apply to tax periods beginning on or after June 1, 2023.?
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Businesses will be permitted to carry forward any incurred tax losses and any disallowed net interest expense for use in future tax periods in which the Small Business Relief plan is not elected, according to the ministry.?
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It also stated, "Revenue can be calculated based on the applicable accounting standards approved in the UAE.?
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The scheme will not be available to qualifying free zone persons or members of multinational enterprises groups — which refers to companies with operations in more than one country that have consolidated group revenues of more than Dh3.15 billion.?
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Currently, certain entities, particularly those engaged in resource extraction activities in the UAE, are free from corporate taxation. They are still liable to the current emirate-level municipal tax.?
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Organizations like governmental bodies, pension or investment funds, and nonprofits can also benefit from other exemptions.?
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Being one of the main contributors to the UAE's economic expansion, existing free zone firms are also exempt from corporate tax, the ministry announced in December.?
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If the Federal Tax Authority determines that a taxpayer has artificially divided their business or business activity and that taxpayer has chosen to apply for the Small Business Relief scheme and the total revenue of the entire business or business activity exceeds Dh3 million in any tax period, "this would be considered an arrangement to obtain a corporate tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the corporate tax law", the ministry said on Thursday.?
The corporate tax system in the UAE is built on the self-assessment premise, thus businesses must make sure the paperwork they submit to the FTA is accurate and compliant with the law.