UAE Corporate TAX: Relief for SME Startups in UAE
Small Business Relief Scheme to support Start-ups under the UAE Corporate Tax Law
In a bid to support the growth and development of small businesses and start-ups, the UAE Ministry of Finance has issued the Ministerial Decision No. 73 of 2023 on Small Business Relief for the purposes of the UAE Corporate Tax Law. This relief is aimed at helping small businesses and start-ups that have limited resources to meet the compliance burden associated with corporate tax. NewsWire has a complete Guide and Details on UAE Corporate Tax 2023.
The Small Business Relief Scheme is available to all UAE resident taxable persons whose revenue is below Dh3 million for the relevant tax period and the previous tax period, respectively. By electing to apply for this relief, the eligible business will not be subject to corporate tax since it is treated as not deriving any “taxable income” in the relevant tax period.
It is worth noting that the Small Business Relief is distinct from the 0% corporate tax rate applicable to “taxable income” up to Dh375,000. When the Small Business Relief is claimed for a relevant tax period, the business cannot claim certain reliefs or deductions during that tax period. Therefore, it is important for businesses to carefully assess whether they qualify for the relief and if the relief will be beneficial to them. Ministry of Finance has also offered relief to Public and Community Welfares as Tax Exemption.
What is the relief that these businesses will get? The Small Business Relief Scheme is designed to support start-ups and small businesses with limited resources to meet the compliance burden associated with corporate tax.
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The scheme provides relief to UAE resident taxable persons with revenues below Dh3 million for the relevant tax period and previous tax periods. This means that if a taxable person has exceeded, or exceeds the Dh3 million revenue threshold in any tax period, then the Small Business Relief will no longer be available. More information on Exemptions on UAE corporate TAX is covered in details as well.
However, the Small Business Relief does not apply to qualifying free zone persons or members of multinational enterprises (“MNEs”) with consolidated group revenues exceeding Dh3.15 billion.
The scheme allows UAE resident taxable persons with revenues below the Dh3 million threshold and that meet certain other conditions, to claim the Small Business Relief by making an election to be treated as not deriving any “taxable income” in the relevant tax period.
In effect, any revenue earned by the UAE resident taxable person below the Dh3 million threshold during the relevant tax period in which the Small Business Relief is claimed would not be subject to corporate tax as the revenue will not be considered as “taxable income”.
When does the 9% apply on qualifying businesses that earn Dh375,000 or more, which is less than Dh3 million? It is important to note that the Small Business Relief is distinct from the zero per cent corporate tax rate applicable to “taxable income”.
If a taxable person has revenues exceeding the Dh3 million threshold, they will not qualify for the Small Business Relief. Nevertheless, their taxable income up to Dh375,000 will be subject to a zero per cent corporate tax rate, and any taxable income above Dh375,000 will be subject to a 9 per cent corporate tax rate.
Therefore, the Small Business Relief Scheme provides a great opportunity for small businesses and start-ups to benefit from the relief and reduce their compliance burden associated with corporate tax. However, businesses should carefully assess whether they qualify for the relief and whether it will be beneficial to them.
Conclusion In conclusion, the UAE Ministry of Finance’s Small Business Relief Scheme is an initiative aimed at supporting small businesses and start-ups by providing relief from the compliance burden associated with corporate tax. The relief is available to UAE resident taxable persons with revenues below Dh3 million for the relevant tax period and previous tax periods. By electing to apply for this relief, eligible businesses will not be subject to corporate tax since it is treated as not deriving any “taxable income” in the relevant tax period. It is important for businesses to carefully assess whether they qualify for the relief.
What is the corporate tax rate in the UAE 2023?
Any business Earning More than AED 375,000 (USD 100,000) is Subjected to 9%
Will UAE introduce corporate tax?
In January 2022, the Ministry of Finance in the UAE announced its plans to introduce federal corporate tax on the net profits of businesses. The tax will be applied to companies across all the emirates and is expected to become applicable either on 1 July 2023 or on 1 January 2024, depending on the financial year followed by the business.
What is the corporate tax from June 2023 in UAE?
Under the new federal corporate tax regime in the UAE, the rates for corporate tax are based on a business's taxable income. If a business's taxable income does not exceed AED 375,000, it will not be subject to any corporate tax and will have a tax rate of 0%. However, if a business's taxable income exceeds AED 375,000, it will be subject to a 9% corporate tax rate on the portion of taxable income that exceeds the specified threshold. This means that businesses in the UAE will only be required to pay corporate tax on the portion of their taxable income that exceeds the specified threshold of AED 375,000
Is Dubai getting corporate tax?
Starting June 2023, Dubai will have a new corporate tax imposed at a rate of 9%.
What is the new law in UAE 2023?
Introduction of Unemployment Insurance, Corporate Tax of 9% for income above AED 375,000 and Emiratization Target of 1% of Locals in Skilled Jobs
What is the new corporate tax regime in UAE?
Under the new federal corporate tax regime in the UAE, businesses will be subject to a 9% tax rate on taxable business profits that exceed a threshold to be determined by a Cabinet decision. This tax will be applicable starting from the first financial year, which for existing companies will begin on June 1, 2023.
