Announced on 6th April 2023 by the Federal Tax Authority (FTA):
The Small Business Corporate Tax Relief under Article 21 of the Corporate Tax Law identifies the revenue threshold and conditions for availing the tax exemption.
The scheme will be implemented in line with the first Corporate Tax period on June 1 2023
What we have learnt at Open Hub Corporate Services:
1. 3 Million AED revenue threshold:
a. 2.99 million AED will have a corporate tax of 0%.
b. 3.01 million AED will have a corporate tax of 9% on the full amount.
2. Small business corporate tax relief will be applicable to onshore mainland companies and not free zones.
a. Freezones have their own corporate tax exemptions, and these exemptions will be
confirmed once the ‘freezone exemption qualifying revenue framework is confirmed in
the next few weeks.
We expect the qualifying revenue freezone tax exemption to consist of revenue from
other freezone jurisdictions and international sales.
3. Only companies with shareholders as UAE residents can claim the Small Business Relief where their revenue in the relevant tax period is below 3 million AED.
4. The 3 million AED revenue threshold will apply to tax periods starting on or after June 1 and only apply to tax periods until 2026.
5. Multinational Enterprises Groups (MNE Groups) with a consolidated group revenue of more than AED 3.15 billion will continue with the higher Corporate tax rate of 15%.
6. The Federal Tax Authority (FTA) has highlighted businesses that artificially separate their business activity and operations to benefit from the tax relief scheme will be sanctioned under the anti-abuse rules of the Corporate Tax Law.
Our Director, Nathan Gatland adds: "This is a great initiative implemented by the FTA and coincides with the UAE’S strategic economic development objectives. The tax relief threshold of 3 million AED ($816,859) is one of, if not the highest, I’ve seen globally. Which only enforces the UAE’s commitment to being a regional and global hub for start-ups and SMEs."