Small Business Relief is designed for the sole benefit of small businesses that are established in the UAE. The purpose of Small Business Relief is to relieve a portion of the compliance obligations that small firms have to meet in the Corporate Tax Regime of the UAE. The framework effectively ensures that small setups in the UAE have suitable grounds to grow and establish themselves into the market, and essentially solidify their place in the UAE business market. Thus, it is advisable for businesses in to seek the expert services of top Tax Consultants at Corporate Tax UAE to effectively determine taxability and avail business relief, in compliance with the corporate tax regulations.
Eligible Taxable Persons
These are Persons who are either a Natural Person or a Judicial Person-are those whose revenue amounts to AED 3,000,000 or less during a given Tax period and/or all Tax Periods terminating on/before 31 December 2026. These Eligible Persons can elect to be handled as possessing no Taxable income in that time period; in effect, they will not be obligated to calculate Taxable Income or complete a Tax Return.
Where a Taxable Person’s Revenue happens to exceed the amount of AED 3000,000 for the given Tax Period, the Taxable Person will lose their ability to opt for Small Business Relief. This will remain so even if their Revenue becomes equal to, or falls below, the set amount of AED 3,000,000 in subsequent Tax Periods.
No Taxable Income: What is It?
Businesses that do not fall under the scope of Small Business Relief work out their Taxable Income by calculating their Accounting Income, and then making adjustments for the Corporate Tax treatment of specified income and expenditure. This includes the exclusion of Exempt Income e.g. dividends and non-deductible expenditure like fines. In addition, businesses may qualify for other kinds of reliefs such as transfers within a Qualifying Group. Then, Businesses are required to calculate the amount of Corporate Tax they have to pay on the basis of their net Taxable Income.
Small Business Relief grant businesses the leeway of having no Taxable Income for a given Tax Period. This means that those Businesses are relieved from the responsibility of calculating their Taxable Income; they are exempt from carrying out the processes of identifying relevant expenses in order to remove or apply any other reliefs.
Businesses falling under the purview of Small Business Relief, then, are to complete a simplified Tax Return. In addition, these Businesses will not be required to maintain Transfer Pricing Documentation.
As such, the benefits that such Taxable Persons will receive, including:
Tax Relief
Taxable Persons will be exempted from payment of Corporate Tax on any and all income gathered during the given Tax Period.
Administrative Relief
Taxable Persons will be exempted from having to calculate Taxable Income. They will procure the advantages of simplified tax return filing, and easier record keeping requirements.
To retain these benefits, meanwhile, firms that opt for Small Business Relief must also adhere to a selected amount of compliance obligations. These are:
- Firms cannot make use of Excess Interest Expenditure during the current Tax Period.
- Firms cannot apply reliefs for transfers within a Qualifying Group, or for the purpose of business restructuring transactions
- Firms cannot utilize or carry forward either Tax Losses or Excess Interest Expenditure during the current Tax Period.
- Firms must comply fully with the specifications of transfer pricing documentation guidelines
- Firms must comply fully with the Arm’s Length Principle.
What is the Arm’s Length Principle?
The Arm’s Length Principle applies to international agreements made between parties that share mutual business interests. It has very broad applicability. Basically, it extends to any agreements involving connected parties and family members. According to the principle, a transaction will be duly made when the outcomes of related and unrelated parties’ involvement in it are comparable.
Avail the Services of Top Tax Consultants in UAE
For businesses to determine taxability and to avail tax relief, in compliance with the corporate tax law, it is advisable to seek the expert services of top Tax Consultants in UAE. Thus, contact us today and we shall be glad to assist you.
Arman Ali, respects both business and technology. He enjoys writing about new business and technical developments. He has previously written content for numerous SaaS and IT organizations. He also enjoys reading about emerging technical trends and advances.
