Coming under the Ministerial Decision No 73 of 2023, the UAE Small Business Relief allows UAE resident taxable persons that are eligible, as well as certain natural UAE persons with UAE business income, to be treated by tax authorities as having no taxable income during a particular tax period. It must be noted that non-resident persons who only have UAE-sourced income may not qualify for having no taxable income in the same manner. In this blog, we dive deep into how to check for eligibility for Small Business Relief UAE and how to apply for it when you are at or below the AED 3M threshold.
There are many benefits to applying for Small Business Relief UAE, such as 0% corporate tax, simplified filings, reduced documentation and accounting flexibility. There are also some drawbacks, such as the fact that you cannot carry your losses forward, interest deductions end up becoming non-deductible, a permanent exit risk (which means crossing AED 3M once will ensure eligibility is ended for all future years), as well as the need to store bank statements and invoices for a period of 7 years. Despite these, many businesses still opt to apply for Small Business Relief in the UAE.
Checking your eligibility to apply for small business relief in the UAE
In order to benefit from Small Business Relief in the UAE, a business must meet the conditions laid down below:
- Revenue Threshold
The gross revenue of the business, which is calculated according to applicable accounting standards from all domestic and foreign sources must be equal to or less than AED 3 Million for the considered tax period, as well as all previous tax periods. This threshold only considers revenue and does not consider profits. Some businesses create duplicate business entities to “split” the total revenue and keep both the businesses’ revenue below AED 3 Million. This kind of an act can be challenged under anti-abuse rules. Also, in the case that your revenue exceeds AED 3 Million in any particular tax period, then the business loses its eligibility for Small Business Relief for that period as well as all future tax periods. This is in spite of the fact that revenue may drop below AED 3 Million in a later period of time.
- Opt in requirement
Small Business Relief UAE is not an automatic relief applied to small businesses. It must be specifically opted into. You must specifically choose to apply for the Small Business Relief when filing your Corporate Tax Return through the Emara Tax Portal.
- Timeline
This applicability is valid for tax periods starting on or after 1 June 2023, ending on or before December 21, 2026.
- Who are eligible for small business relief UAE?
UAE resident juridical persons (such as LLCs), as well as natural persons (sole- proprietors/freelancers)
- Who are ineligible for small business refief UAE?
Qualifying Free Zone persons (already at 9% or 0% rate)
Members of Multinational Enterprise (MNE) groups with consolidated revenue > AED 3.15 billion.
How to apply for small business relief with revenue less than AED 3 M
- Calculate your revenue. Ensure that your total revenue in the current tax period as well as all previous tax periods, are each below or equal to AED 3 M.
- Login to the Emara Tax Portal (https://eservices.tax.gov.ae/ ) and file your tax return.
- Choose to Elect for Relief: Within the Corporate Tax Return Form, check the box to apply for Small Business Relief.
- There is no automatic application for Small Business Relief. One must proactively opt to elect for Small Business Relief in the UAE Corporate Tax Small Business Relief Form on the Emara tax portal.
Small Business Relief in the UAE offers significant benefits for eligible businesses with revenue below AED 3 million, including a 0% corporate tax rate and simplified compliance requirements. However, businesses must carefully assess their eligibility and understand the limitations, such as the inability to carry forward losses and the permanent loss of eligibility if the revenue threshold is exceeded. By accurately tracking revenue and proactively opting for the relief through the EmaraTax portal, small businesses can effectively reduce their tax burden while remaining compliant with UAE Corporate Tax regulations.
