UAE.. tax facilities for small businesses with revenues of less than 3 million dirhams

The Ministry of Finance in the United Arab Emirates issued Ministerial Resolution No. (73) of 2023 regarding small business facilities for the purposes of Federal Decree-Law No. (47) of 2022 regarding corporate and business tax (corporate tax law). The Ministerial Resolution regarding “Small Business Facilities” defines the mechanism for applying the provisions contained in Article No. (21) of the Corporate Tax Law, which stipulates that a taxable person shall be dealt with as a person who did not achieve any taxable income during the specified tax period, as he did not His revenues exceed a certain limit.

The Small Business Facilitation aims to support start-ups and other small or micro businesses by reducing corporate tax burdens and compliance costs. The ministerial decision regarding small business facilities defines the revenue limit and the conditions that a taxable person must fulfill in order to choose to benefit from small business facilities, as well as clarifies the provisions for carrying forward tax losses and non-deductible net interest expenses for the purposes of benefiting from small business facilities.

The Ministerial Resolution on Small Business Facilities stipulates the following:

Resident persons subject to corporate tax can claim small business facilities if their revenues for the relevant tax period and previous tax periods do not exceed 3 million dirhams for each tax period. Accordingly, whenever the taxable person’s revenue exceeds the limit of 3 million dirhams in any tax period, then Small business facilities will not be available.
The limit of 3 million dirhams applies to tax periods beginning on or after June 1, 2023, and the same revenue limit continues to be applied to subsequent tax periods only that end before or on December 31, 2026.

Exceptions

“Small business facilities” will not be available to qualified persons residing in the free zone, or companies that are members of multinational companies groups defined in Cabinet Resolution No. (44) of 2020 regarding organizing reports submitted by multinational companies as companies that conduct business in more than of a country with total consolidated revenues as a group of more than AED 3.15 billion.

Revenue can be determined based on the accounting standards in force and accepted in the United Arab Emirates.

carry forward losses
Businesses that do not elect to benefit from the small business facilities during the tax periods specified in the decision will be able to carry forward their incurred tax losses, and any net interest expenses that are not deductible from these tax periods, to be used in subsequent tax periods in which the application of the small business facilities is not elected.
As for the fictitious dismissal of businesses, the ministerial decision stipulates that if it is proven to the authority that people have dismissed their business or their business activity in a fictitious manner, and that the revenues of the entire business or business activity exceed the limit of 3 million dirhams in any tax period, and the application of small business facilities has been chosen, This is an arrangement for obtaining a corporate tax benefit in accordance with Clause (1) of Article (50) regarding the general rules for combating abuse of the corporate tax law.