What is Small Business Relief?
Small Business Relief in the UAE is a program designed to help small businesses with the transition to the new Corporate Tax regime. This initiative is aimed at easing the compliance burden for small businesses, especially in the initial stages of the implementation of the Corporate Tax system.
Revenue Threshold
To qualify for Small Business Relief, a business must have a total Revenue of AED 3,000,000 or less during the relevant Tax Period, as well as all previous Tax Periods.
The Revenue should be calculated using the accounting standards accepted in the UAE, following the arm’s length principle.
Eligibility for Small Business Relief
Small Business Relief is available to businesses in the UAE that meet the following criteria:
- Revenue Threshold: The business must have a total revenue of AED 3,000,000 or less for the relevant Tax Period and all earlier Tax Periods.
- Taxable Person: The business must be a Taxable Person under the UAE’s Corporate Tax Law. This includes both companies and certain individuals engaged in business activities.
Who is not eligible for Small Business Relief?
- Member of a Multinational Enterprise Group (MNE): If the business is part of a MNE, it will not qualify for Small Business Relief.
- Qualifying Free Zone Person: Businesses that are Qualifying Free Zone Persons (businesses that meet specific criteria set for companies operating in UAE free zones) are also not eligible for Small Business Relief, as they may be subject to different tax regulations.
The below table highlights the key differences in tax obligations and requirements for businesses that opt for Small Business Relief versus those that do not.
Requirement | If election for Small Business Relief is made | If no election for Small Business Relief is made |
Required to register for Corporate Tax | ✔ | ✔ |
Required to file a full Tax Return | ✘ | ✔ |
Can file a simplified Tax Return | ✔ | ✘ |
Required to calculate Taxable Income | ✘ | ✔ |
No Corporate Tax to pay | ✔ | Depends on the level of Taxable Income |
Subject to meeting necessary conditions: | ||
– Can add and utilize Tax Losses for the relevant Tax Period | ✘ | ✔ |
– Can add and utilize Excess Interest Expenditure for the relevant Tax Period | ✘ | ✔ |
– Can carry forward Tax Losses and Excess Interest Expenditure from earlier Tax Periods | ✔ | ✔ |
– Can apply reliefs for transfers within a Qualifying Group or for Business restructuring transactions | ✘ | ✔ |
– Must follow transfer pricing documentation requirements | ✘ | ✔ |
– Must follow the Arm’s Length Principle | ✔ | ✔ |
What is the deadline for the availability of SBR?
Small Business Relief (SBR) is available until 31 December 2026. Any eligible Taxable Person (whether a Resident Taxable Person, which can be either a Natural Person or a Juridical Person) that meets the eligibility criteria can choose to benefit from the relief until this date.
Advantages of Small Business Relief:
- Reduced Tax Burden: Small businesses with revenue under AED 3,000,000 do not have to pay Corporate Tax, making it easier to manage finances.
- Simplified Compliance: The program simplifies tax filings, making it easier for small businesses to follow tax regulations. They do not have to maintain extensive records or submit complicated reports, saving them time and resources.
Disadvantages of Small Business Relief:
- Limited Eligibility: Only businesses with revenue under AED 3,000,000 qualify. If a business exceeds this threshold, it loses its relief and faces higher taxes.
- Excludes Some Businesses: Businesses that are part of a MNE or Qualifying Free Zone Persons are not eligible for this relief.
- Non-resident taxable person shall not be eligible for election of small business relief. Like the taxable person based on permanent establishment and nexus shall not be eligible for small business relief.
- Not eligible to carry forward the loss: The businesses electing for small business relief are not eligible to carry forward the losses incurred during the tax period under election.
Why Choose Spectrum Auditing?
At Spectrum Auditing, we go beyond just being an auditing firm; we’re your trusted partner in navigating the ever-evolving landscape of UAE regulations. Here’s what sets us apart:
- Unparalleled Expertise: Our team consists of accredited auditors, management accountants, consultants with in-depth knowledge of UAE laws, ensuring your business remains compliant.
- Streamlined Solutions: We take a comprehensive approach, guiding you through every step of the process, from risk assessment to filing reports.
- International Recognition: Be audits or any type of compliance, we adhere to the highest standards (ISA, IAS, IFRS), providing global credibility.
- Personalized Support: We understand every business is unique. We tailor our services to address your specific needs and answer any questions you may have.
Partner with Spectrum Auditing today. Let’s focus on your success, while you focus on what you do best – running your business.
Contact us today for a consultation at +971 4 2699329 or email [email protected] to get all our queries addressed.