UAE Announces Corporate Tax Relief for Small Businesses & Startups

The United Arab Emirates (UAE) government has announced a new corporate tax relief initiative aimed at providing much-needed support to small businesses and startups. The move is part of the government’s efforts to strengthen the economy and promote entrepreneurship in the country.

Under the new scheme, small businesses and startups with an annual turnover of less than AED 3 million will be exempt from paying corporate taxes. The initiative is expected to benefit more than 28,000 companies in the UAE.

The Ministerial Decision No. 73 of 2023 specifies that businesses and individuals with revenues of Dh3 million or less can benefit from Small Business Relief initiative as it is intended to support start-ups and other small businesses by reducing their corporate tax burden and compliance costs.

The UAE government last year announced that it would levy a nine per cent tax on the profits of companies exceeding Dh375,000.

The Ministry said the Dh3 million revenue threshold will apply to tax periods starting on or after June 1, 2023 and will only continue to apply to subsequent tax periods that end before or on December 31, 2026.

Under the initiative, taxable persons that are resident persons can claim Small Business Relief where their revenue in the relevant tax period and previous tax periods is below Dh3 million for each tax period.

It further explained that tax periods defined in the Ministerial Decision where businesses do not elect to apply for Small Business Relief, will be able to carry forward any incurred tax losses and any disallowed net interest expenditure from such tax periods, for use in future tax periods.

With regard to the artificial separation of business, if taxable persons have artificially separated their business or activity and the total revenue exceeds Dh3 million in any tax period and such persons have elected to apply for Small Business Relief, this would be considered an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the Corporate Tax Law.

However, the ministry added that the relief will not be available to qualifying free zone persons or members of Multinational Enterprises Groups with operations in more than one country and consolidated group revenues of more than Dh3.15 billion.