In the United Arab Emirates (UAE), the Small Business Relief (SBR) initiative under the Corporate Tax Law offers eligible businesses the option to be treated as having no taxable income for a given tax period, effectively exempting them from corporate tax during that period. This relief is designed to support small enterprises by reducing their tax compliance burden.
Eligibility Criteria
To qualify for Small Business Relief, a business must meet the following conditions:
- Resident Status: The business must be a Resident Person in the UAE, which includes both natural persons (individuals) and juridical persons (entities).
- Revenue Threshold: The business’s revenue must not exceed AED 3 million in the relevant tax period and all previous tax periods ending on or before 31 December 2026.
- Exclusions: Certain entities are not eligible for SBR, including:
- Members of Multinational Enterprise (MNE) Groups with consolidated group revenues exceeding AED 3.15 billion.
- Qualifying Free Zone Persons who benefit from specific tax incentives.
Key Features of Small Business Relief
- Tax Exemption: Eligible businesses electing for SBR are treated as having no taxable income for the relevant tax period, resulting in no corporate tax liability for that period.
- Simplified Compliance: Businesses benefiting from SBR are not required to calculate taxable income or maintain transfer pricing documentation for the relevant tax period, thereby reducing administrative burdens.
- Election Requirement: To avail of SBR, eligible businesses must elect for the relief in their corporate tax return for each applicable tax period. This election must be made annually and cannot be applied retroactively.
Compliance Obligations
Even when electing for Small Business Relief, businesses must:
- Register for Corporate Tax: All businesses, including those eligible for SBR, are required to register for corporate tax with the Federal Tax Authority (FTA).
- File Tax Returns: Eligible businesses must file a simplified tax return for each tax period in which they elect for SBR.• Maintain Records: Businesses must retain records evidencing their revenue and eligibility for SBR for a period of seven years from the end of the relevant tax period.