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Ministry of Finance issues decision on Small Business relief for Corporate Tax purposes

Ministerial Decision No. 73 of 2023 has been issued by the Ministry of Finance for Small Business Relief under the Corporate Tax Law. The decision allows taxable persons whose revenue does not exceed a certain threshold to be treated as not having any taxable income in a given tax period. The purpose of Small Business Relief is to support start-ups, small, and micro businesses by reducing their Corporate Tax burden and compliance costs. The decision outlines the conditions and revenue thresholds for electing for Small Business Relief, and also clarifies the provisions for the carried forward Tax Losses and disallowed Net Interest Expenditure under the scheme.

Under the decision, resident taxable persons with revenue below Dh3 million for each tax period can claim Small Business Relief, but the relief will no longer be available once they exceed the Dh3 million threshold in any tax period. The Dh3 million revenue threshold applies to tax periods starting on or after June 1, 2023, and will only continue to apply to subsequent tax periods that end before or on December 31, 2026. Revenue can be determined based on the applicable accounting standards accepted in the UAE.

Qualifying Free Zone Persons and members of Multinational Enterprises Groups (MNE Groups) cannot avail of Small Business Relief. MNE Groups are groups of companies with operations in more than one country that have consolidated group revenues of more than Dh3.15 billion. If businesses do not elect to apply for Small Business Relief in a particular tax period, they can carry forward any incurred Tax Losses and disallowed Net Interest Expenditure for use in future tax periods in which the relief is not elected.

The decision also specifies that the artificial separation of business would be considered an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the Corporate Tax Law if the Federal Tax Authority (FTA) determines that taxable persons have artificially separated their business or business activity and the total revenue of the entire business or business activity exceeds Dh3 million in any tax period and such persons have elected to apply for Small Business Relief.

This article was published on  6  April 2023

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