The United Arab Emirates (UAE) has been actively working towards fostering a supportive environment for small businesses, and the Ministry of Finance has recently issued a decision that aims to provide relief to small businesses for corporate tax purposes. This decision is a significant step towards promoting entrepreneurship, boosting economic growth, and encouraging small business owners in the UAE.
Small businesses play a crucial role in the UAE’s economy, contributing to job creation, innovation, and economic diversification. However, small businesses often face challenges, including financial constraints and regulatory requirements, that can hinder their growth and sustainability. Recognizing the importance of small businesses, the UAE’s Ministry of Finance has taken a proactive approach to support them through this new decision.
The Ministry of Finance in the UAE has recently announced a relief initiative aimed at supporting small and micro businesses, start-ups, and freelancers by reducing their corporate tax burden and compliance costs. This initiative will come into effect from June 1, 2023, as per Ministerial Decision No. 73 of 2023.
According to the decision, businesses and individuals with revenues of Dh3 million or less will be eligible for the Small Business Relief initiative. The purpose of this initiative is to provide support to start-ups and small businesses by reducing their corporate tax burden and compliance costs. This move comes after the UAE government’s announcement last year that a 9% tax would be levied on companies’ profits exceeding Dh375,000.
The revenue threshold of Dh3 million will be applicable to tax periods starting on or after June 1, 2023, and will continue to apply to subsequent tax periods that end before or on December 31, 2026. Under this initiative, resident taxable persons can claim Small Business Relief if their revenue in the relevant tax period and previous tax periods is below Dh3 million for each tax period.
Additionally, the ministry clarified that businesses that do not elect to apply for Small Business Relief during the defined tax periods will have the option to carry forward any incurred tax losses and disallowed net interest expenditure from such tax periods for use in future tax periods. This initiative aims to provide support to small and micro businesses, start-ups, and freelancers in the UAE and reduce their corporate tax burden, promoting economic growth and development.
KLOUDAC Accounting Firm Dubai, UAE
The Ministry of Finance’s decision on small business relief for corporate tax purposes is a positive development for small businesses in the UAE. KLOUDAC is a reputed accounting firm that can guide you to understand the aspects of the corporate tax and its requirements for your business.