Everything about Small Business Relief under Corporate Tax in UAE

Small Business Relief (SBR) is a tax benefit for UAE businesses that meet specific criteria. It enables qualifying businesses to reduce or eliminate their Corporate Tax obligations. This initiative aims to support small businesses' growth by reducing their tax burden.

How does it work?

To receive Small Business Relief (SBR), businesses must notify the Federal Tax Authority (FTA) through their Corporate Tax returns. Eligible businesses can apply for the relief for the current tax year. Here's what this means:

• The business will not be taxed on its profits for that tax year.
• The business will still need to file a Corporate Tax return, but it will not have to pay tax.
• The relief applies only during tax periods when revenue remains within the threshold.

Here's what you get when you choose SBR for your business:

• Tax losses: The business cannot carry forward tax losses to future years.
• Interest deduction: The corporation may not deduct interest expense from taxable income.
• Related party transactions: The business still needs to comply with transfer pricing rules when dealing with related parties.

In short, no. Small Business Relief applies only to Corporate Tax, not Value Added Tax (VAT). It does not have an impact on VAT obligations or input tax claims. However:

• A business must still register for VAT if its turnover exceeds AED 375,000 per year.
• VAT registrants must continue to file VAT returns and collect VAT from customers.

If you want to learn more about VAT and how to avoid it, we've got an article on that. If there's anything else you'd like advice on, like other taxes or questions about running a business in the UAE, just drop us a line using the button below.

If several companies are part of a tax group, the total revenue of the group is taken into account when determining eligibility for the Small Business Relief. If the combined revenue of all entities in the group exceeds AED 3 million, none of them will qualify for the exemption.

To claim a SBR, you'll need to keep good records of your finances. If you decide to go down this route, here's what you'll need to keep:

• Invoices for sales and purchases.
• Bank statements and financial reports.
• Payroll records and contracts.
• Corporate Tax filings and declarations.

Not keeping records could lead to penalties and loss of tax advantages. But it can be quite expensive and time consuming to deal with these kinds of things in-house. Outsourcing your accounting may be the way. movingo offers the best value for your money. Give us 15 minutes of your time and we'll do our best to convince you.