What is Small Business Relief?

Small Business Relief in the UAE is like a helping hand for small companies when it comes to dealing with taxes. Instead of getting tangled up in lots of paperwork and complex tax calculations, this relief program makes things simpler and less stressful. It’s designed to ease the burden on small businesses as they get used to the new Corporate Tax system. So, they can focus more on running their business smoothly without worrying too much about tax, 

If you’re a taxable person living or operating a business in the UAE and your revenue is AED 3,000,000 or less in a given tax period and all the periods before December 31, 2026, you can choose not to deal with taxes for that period. You won’t have to calculate your taxable income or fill out a detailed tax return. 

Business entities who opt for small business tax relief, have two advantages: 

Tax Relief: 

They don’t have to pay corporate tax on income earned in that tax period. 

Administrative relief: 

After opting for small business tax relief, there is no need to calculate Taxable income and they can just file a simplified Tax Return. Businesses who have opted for small business tax relief can also make their reports on cash basis instead of accrual basis.  

What is the revenue threshold? 

To qualify for Small Business Relief, your revenue as a taxable person should be AED 3,000,000 or less for both the current and all past tax periods. If your revenue goes over AED 3,000,000 in any tax period, you can’t opt for Small Business Relief anymore, even if your revenue drops below AED 3,000,000 in later tax periods. 

Who is not eligible for Small Business Relief? 

Small Business Relief is accessible to UAE residents whose revenue remains under AED 3,000,000 for both the ongoing tax period and all preceding ones. However, there are two notable exceptions to this condition: 

1. If a business is a member of multinational Enterprise group (MNE) 
2. If you are considered a qualifying free zone person.  

Note: a qualifying free zone person already benefits from 0% corporate tax rate on qualifying income. 

Members of an MNE: 

MNEs are group of companies that have business activity in more than one country and have consolidated revenue of more than AED 3.15 billion. 

Artificial separation: 

If someone tries to split their business into multiple parts just to keep each part’s revenue below the relief threshold, they won’t qualify for Small Business Relief. If the tax authorities discover this, the owner will have to pay back any taxes they avoided and might face penalties too. 

Summary:

Small Business Relief allows eligible residents to skip paying taxes if their revenue is AED 3,000,000 or less for the current and previous tax periods until December 31, 2026. This means they won’t owe any Corporate Tax. The amount of tax they save depends on how well their business is doing. Otherwise, they would have to pay Corporate Tax, starting at 0% for income up to AED 375,000 and 9% for income above that. 

Note: if you have any questions after reading this, please reach out to us.