Sri Krishna
Great news for small businesses, startups, and freelancers in the UAE! The Ministry of Finance has introduced the Small Business Relief initiative, aimed at reducing corporate tax expenses and simplifying tax compliance for eligible entities. Starting from June 1, 2024, this program provides support and encouragement for businesses and individuals with revenues of Dh3 million or less.
It’s important to note that the Dh3 million revenue threshold specified by the Ministry of Finance applies to tax periods starting on or after June 1, 2024. This threshold will continue to be applicable for subsequent tax periods ending on or before December 31, 2026. The Ministry may review and adjust the threshold after this date. Small and micro businesses, startups, and freelancers should consider this information while planning their tax obligations in the coming years.
To qualify for the Small Business Relief initiative, resident taxable persons must have revenue below Dh3 million for each tax period, including previous periods. If their revenue falls below this threshold, they can claim the relief. Maintaining accurate records of revenue is crucial for eligibility and to avoid any potential issues with tax authorities.
Businesses that choose not to apply for Small Business Relief in a specific tax period can still carry forward any incurred tax losses and disallowed net interest expenditure from that period. These losses and expenditures can be utilized in future tax periods, helping to reduce overall tax burdens. Keeping track of such losses and expenditures is essential for businesses to take advantage of this feature of the tax system.
The Ministry of Finance has emphasized that if taxable persons artificially separate their business or activities to qualify for Small Business Relief and their total revenue exceeds Dh3 million in any tax period, it will be considered an arrangement to gain a Corporate Tax advantage under Clause (1) of Article 50 of the Corporate Tax Law. This aligns with the general anti-abuse rules of the Corporate Tax Law, aimed at preventing businesses from engaging in artificial arrangements or transactions solely for tax benefits. Businesses should ensure they avoid any such artificial arrangements or transactions that could be viewed as tax avoidance.
Furthermore, the Ministry clarified that the Small Business Relief initiative will not be extended to qualifying free zone persons or members of Multinational Enterprise Groups with operations in multiple countries and consolidated group revenues exceeding Dh3.15 billion.
Please note that the information provided is accurate as of the current date, but it’s always advisable to consult official sources or seek professional advice for the most up-to-date and specific guidance regarding tax regulations and eligibility criteria.
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