UAE announces tax relief for small businesses

Small businesses, with revenues of AED 3 million or less, can benefit from tax relief under a new scheme introduced by the UAE's Ministry of Finance.

The Small Business Relief under Article 21 of the Corporate Tax Law details the revenue threshold and conditions for availing the tax exemption. 

It will apply to "tax periods starting on or after June 1 and will only continue to apply to subsequent tax periods that end before or on December 31, 2026," the ministry added.

The move is intended to support start-ups and other small or micro businesses in the UAE.

Ministerial Decision on Small Business Relief stipulates the following:

1. Taxable persons, who are residents, can claim Small Business Relief where their revenue in the relevant tax period is below AED3 million.

2. The AED3 million revenue threshold will apply to tax periods starting on or after June 1 and will only continue to apply to subsequent tax periods that end before or on December 31, 2026.

3. Revenue can be determined based on the applicable accounting standards accepted in the UAE.

4. It will not be available to Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups) with a consolidated group revenue of more than AED 3.15 billion.

5. In tax periods where businesses do not elect to apply for Small Business Relief, they will be able to carry forward any incurred Tax Losses and any disallowed Net Interest Expenditure from such tax periods, for use in future tax periods in which the Small Business Relief is not elected.

6. If the Federal Tax Authority (FTA) establishes that firms have "artificially separated their business or business activity" to benefit from the scheme it could be deemed "general anti-abuse rules of the Corporate Tax Law".

For more details are available on the ministry's website.