Corporate Tax Relief : The Ministerial Decision No. 73 of 2023 outlines the eligibility criteria and conditions for Small Business Relief election, which is applicable to businesses with revenues of AED 3 million or less
The determination of revenue can be based on the accounting standards accepted in the UAE
The Ministry of Finance in Abu Dhabi, UAE has released Ministerial Decision No. 73 of 2023 for Small Business Relief under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022)
Article 21 of the Corporate Tax Law states that if a taxable person’s revenue does not exceed a certain threshold, they will not be considered to have earned any taxable income in that tax period. The decision has been issued in compliance with this article.
The aim of Small Business Relief is to provide assistance to small or micro businesses and startups by decreasing their Corporate Tax liability and reducing their compliance expenses. The Ministerial Decision on Small Business Relief outlines the revenue threshold and requirements for businesses to apply for the relief, as well as the provisions for carrying forward Tax Losses and disallowed Net Interest Expenditure within the scheme
The following are stipulated by the Ministerial Decision on Corporate Tax Relief:
- Resident taxable persons with revenue below AED3 million in the current and previous tax periods are eligible to claim Small Business Relief. The relief will not be available once the revenue threshold is exceeded in any tax period.
- The AED3 million revenue threshold will apply to tax periods starting from 1 June 2023 and will only continue to apply until 31 December 2026.
- Revenue can be determined based on the relevant accounting standards accepted in the UAE.
- Qualifying Free Zone Persons and members of Multinational Enterprises Groups (MNE Groups) are not eligible for Small Business Relief (Corporate Tax Relief). MNE Groups refer to companies with consolidated group revenues exceeding AED3.15 billion and operations in multiple countries.
- Businesses that do not apply for Small Business Relief can carry forward any Tax Losses and disallowed Net Interest Expenditure from those periods for future use.
- The Ministerial Decision also addresses the artificial separation of businesses. If the Federal Tax Authority (FTA) determines that a taxable person has artificially separated their business, and the total revenue exceeds AED3 million in any tax period and the person has applied for Small Business Relief, this would be deemed as an attempt to gain a Corporate Tax advantage under Clause (1) of Article 50 of the Corporate Tax Law’s general anti-abuse rules.
You can find all the Cabinet Decisions and Ministerial Decisions related to the Corporate Tax Law on the Ministry of Finance’s website at www.mof.gov.ae.