Small Business Relief for UAE Corporate Tax – Complete Guide for SMEs
With the introduction of UAE corporate Tax, businesses has to change the way they are managing their financials and must ensure tax compliance. The Federal Tax Authority (FTA) of the UAE has defined 9% corporate tax for the businesses whose taxable income is above AED 375,000. However, the UAE government has also introduced Small Business Relief (SBR) to provide relief to eligible small businesses.
We will discuss Small Business Relief in detail moving forward but an important thing to clarify here is that most businesses think they do not need to register for corporate tax. Corporate tax registration is mandatory for all the businesses registered in the UAE. Failure to register for Corporate Tax will result in AED 10,000 penalty.
What is Small Business Relief?
Small Business Relief is a tax relief introduced under the UAE Corporate Tax regime that allows qualifying businesses to be treated as having no taxable income for an eligible tax period.
As mentioned earlier, Small Business Relief (SBR) is offered by UAE corporate Tax regime to support small businesses such as startup, entrepreneurs and SME. While an eligible business remains subject to corporate tax regulations, it will not pay corporate Tax on taxable income for the qualifying period.
Are you eligible for Small Business Relief?
If your business meets the below listed criteria than you might be eligible for SBR.
Annual Revenue Threshold: Your business revenue should not exceed AED 3 million during the qualifying tax periods. And this AED 3 million threshold applies to total revenue rather than taxable profit.
UAE Resident Person
The relief is available only to Resident Persons, including:
- Natural persons conducting business activities that are subject to Corporate Taxisions based on accurate financial data.
- Mainland companies
- Most UAE Free Zone companies that qualify as Resident Persons
Who Cannot Claim Small Business Relief?
Small Business Relief is generally not available to:
- Multinational companies and Groups that are meeting global revenue threshold for pillar two taxation.
- Qualifying members of large multinational groups.
- Businesses that do not meet the Resident Person requirement.
- Businesses exceeding the AED 3 million revenue threshold.
If your revenue exceeds the threshold during an applicable tax period, Small Business Relief will generally no longer be available.
Do You Still Need to Register for Corporate Tax?
Yes. As mentioned earlier, it is the most common misconceptions among the businesses eligible for Small Business Relief do not need Corporate Tax Registration.
- Eligible businesses must still register for Corporate Tax and obtain Corporate Tax Registration Number (TRN).
- All business should maintain proper accounting records.
- All the business must file corporate tax return within the due date.
Failure to file the Corporate Tax Return on time may result in penalties even if no Corporate Tax is payable.
Do You Need to File a Corporate Tax Return?
- Absolutely. Small Business Relief does not remove the filing obligation.
- Every eligible business must submit its Corporate Tax Return through the Federal Tax Authority (FTA) portal within the prescribed deadline.
- The SBR relief can only be claimed during the process of Corporate tax return filing.
Benefits of Small Business Relief
If your business is eligible for Small Business Relief, you do not have to pay corporate tax for the qualifying period.
- SBR, provide you ease in terms of tax compliance.
- Support startups and SMEs
- Opportunity to utilize resources more efficiently
- Simplified Corporate Tax calculationspportunities.
What Happens if Your Revenue Exceeds AED 3 Million?
Once your revenue exceeds AED 3 Million, your business becomes subject to standard UAE corporate tax rules. Which means you must prepare your financials in accordance with UAE tax laws to calculate your taxable income and figure out your corporate tax liability. A well-structured accounting and tax planning plays a pivotal role to ensure tax compliance.
Hire Professional Tax Consultants
Small Business Relief (SBR) offers great deal of support to startups and SMEs to reducing their corporate tax burden, but this does not mean that you don’t have to register for corporate tax. As stated earlier, any business registered in UAE must do corporate tax registration, maintain proper accounting records and ensure timely corporate tax return filing. Also, keep in mind the SBR is only applicable if your revenue is AED million or less, the moment you cross this threshold you will be subject to standard corporate tax rate.
It is highly suggested that businesses should hire professional accounting and audit firms to maintain their financials efficiently and ensure UAE tax compliance. Whether it is VAT or Corporate tax, a professional accounting firm or tax consultant help you streamline your financials so that you can focus on business operations and expansions.
At Alpha Auditing, we assist businesses across the UAE with Corporate Tax registration, bookkeeping, accounting, tax advisory, and Corporate Tax Return filing. Our team can assess your eligibility for Small Business Relief and ensure your business remains fully compliant with the latest UAE Corporate Tax regulations.
