The Ministry of Finance has announced the issuance of the Ministerial Decision No. 73 of 2023 regarding Small Business Relief in accordance with the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, also known as the “Corporate Tax Law.”
Under Article 21 of the Corporate Tax Law, a taxable person who did not earn taxable income in a particular tax period due to their revenue falling below a specific threshold is treated as such. Small Business Relief aims to provide support to start-ups, small, and micro-businesses by reducing their Corporate Tax liabilities and compliance expenses.
The Ministerial Decision outlines the criteria for qualifying for Small Business Relief, including the revenue threshold, and explains the treatment of Tax Losses and disallowed Net Interest Expenditure carried forward under the program.
The authority stated that “taxable persons that are resident persons can claim Small Business Relief where their revenue in the relevant tax period and previous tax periods is below AED3 million for each tax period,” as per a Twitter post by UAEBARQ.
Over the years, UAE has become a flourishing tech startup ecosystem, owing to its favourable location, supportive government regulations, availability of high-quality talent, and investment opportunities.
Startups as well as Small and Medium-sized Businesses (SMBs) comprise 94 percent of the companies and institutions operating in the country and contribute over 50 percent to its GDP. This makes them an essential contributor to the development of a competitive knowledge-based economy.
The Ministerial Decision on Small Business Relief stipulates the following
- Resident taxable persons with revenue below AED3 million in the relevant and previous tax periods can claim Small Business Relief. The relief is no longer available once the AED3 million threshold is exceeded in any tax period.
- The AED3 million revenue threshold applies to tax periods from 1 June 2023 until 31 December 2026.
- Revenue can be determined using applicable accounting standards in the UAE.
- Qualifying Free Zone Persons and members of Multinational Enterprises Groups (MNE Groups) defined in Cabinet Decision No. 44 of 2020 are not eligible for Small Business Relief. MNE Groups are companies with consolidated group revenues exceeding AED3.15 billion.
- Taxpayers not applying for Small Business Relief in a defined tax period can carry forward Tax Losses and disallowed Net Interest Expenditure for future tax periods.
- Artificial separation of business resulting in revenue exceeding AED3 million for taxpayers who elected to apply for Small Business Relief will be considered an arrangement to obtain Corporate Tax advantage under Clause (1) of Article 50 of the Corporate Tax Law’s general anti-abuse rules, as specified in the Ministerial Decision.
- All Cabinet Decisions and Ministerial Decisions related to the Corporate Tax Law should be considered.
