As corporate tax registrations gain momentum in the UAE, the Small Business Relief’ program delivers a key exemption for startups and SMEs in the UAE. Any business that generates under AED 3 million in revenue is eligible to apply for a tax break that extends up to the end of 2026.
Corporate tax was officially implemented in the UAE for the financial year that commenced on the 1st of June 2023. A KPMG report reveals “barring Bahrain, the UAE has introduced the lowest corporate income tax rate within the GCC region at a standard rate of 9%.” In the case of free zones, the report states that all businesses registered in the Free Zone who do not conduct any business with the mainland “shall be subject to 0% tax (or be exempt as the case may be) until the end of the holiday period. All free zones have to file an annual CT return.”
The Federal Tax Authority issued a Public Clarification on the First Tax Period of a Juridical Person.
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— Federal Tax Authority – الهيئة الاتØادية للضرائب (@uaetax) August 9, 2024
Ganesh Iyer, managing director at FinAce Consultancy LLC, informs businesses “to diligently monitor their revenues to ensure they remain within the specified threshold for the relevant tax period. Proper accounting systems and accurate record-keeping are critical to demonstrating compliance with SBR requirements. We strongly recommend that all eligible businesses implement robust financial management practices to secure their qualification for this relief.”
In order to avail the three-year tax exemption, all eligible entities must be recognized as resident taxable entities in the UAE. Upon declaring an annual revenue of less than AED 3 million, emerging startups, new players in the F&B market,l and firms offering technical services can enjoy these tax exemptions. Federal tax authorities emphasize that “a member of a multinational group with consolidated group revenue of more than AED 3.15 billion” is not eligible for this exemption.
This article has been edited with comment from Ganesh Iyer, managing director at FinAce Consultancy LLC.Â
