Small Business Tax Relief Under UAE CT

A new tax structure, the UAE Corporate Tax (CT), created by the government of UAE came into force on June 1, 2023. The CT is a business income tax, but there are certain exemptions available for small businesses. One of the most significant advantages available to micro businesses is the Small Business Relief programme. This relief treats a small firm as if it did not generate any taxable revenue during a tax period.

Eligibility Criteria Small Business Tax Relief:

To be eligible for Small Business Relief, a Taxable Person must satisfy specific conditions:

In the concerned assessment period and all previous assessment periods ending on or before December 31, 2026, it should be less than AED 3 million in revenue.

To qualify for Small Business Relief, a declaration must be made within the relevant Tax Return.

Small Business Relief is accessible to resident individuals, including:

• Juridical entities incorporated in the UAE, including those in free zones.
• Juridical entities incorporated outside the UAE but controlled and managed from the UAE.
• Any natural person conducting business or related activities in the UAE.
• Individuals identified by the cabinet under any decision.

Application Process

The application procedure for the UAE Corporate Tax (CT) Small Business Tax Relief is simple. Here's a step-by-step guide:

Check Eligibility: Make sure the business qualifies for Small Business Relief. It involves obtaining a revenue not exceeding AED 3,000,0 during the relevant Tax Period and all previous Tax periods ending on or before December 216.

Prepare Documentation: Collect all documents required to support your application, including financial records.

Complete Tax Return: While filing your Tax Return for the respective Tax Period, make the election for Small Business Relief. Provide accurate financial information and indicate your eligibility for the relief.

Submit Application: Submit the Tax Return, including the election for Small Business Relief, through the designated platform or to the relevant tax authorities. Ensure all required documents are attached.

Review Process: The tax authorities will review your application. They may request additional information if needed.

Approval and Implementation: Once your application is approved, your business will be granted Small Business Relief. This means it will be treated as not having derived any taxable income within the specified Tax Period.

Compliance: Ensure ongoing compliance with tax regulations to continue benefiting from Small Business Relief in subsequent Tax Periods.

It's advisable to consult with tax professionals like Audit Firms or the relevant authorities for detailed guidance and to stay updated on any changes in the application process.

Benefits and Limitations of these corporate tax relief.

Small Business Relief stands out as a game changer for the UAE's small businesses. It allows qualifying Resident Taxable Persons, whether individuals or corporations, to be excluded from UAE Corporate Tax if they meet certain revenue requirements. Opting for this relief provides two key benefits:

Administrative Relief: Eligible businesses can avoid the complexity of determining their taxable income, resulting in a more convenient experience. This simplifies tax return filing and record-keeping. Businesses can also use the cash basis of accounting to prepare their financial statements, which simplifies financial management.

Tax Relief: Small Business Relief allows businesses to avoid paying Corporate Tax on income produced within a specific Tax Period. This delivers a huge financial benefit by allowing small enterprises to better allocate resources.

Businesses that use Small Business Relief might not only reduce their administrative burden but also see an actual reduction in their tax bills, resulting in a more favourable operating climate for small businesses in the UAE.

Why consult a tax consultant?

Why would it be a wise decision to hire an accountant who specializes in the area of Business Tax Relief under UAE Corporate Tax (CT)? The answer is very simple. However, keeping up with the intricacies of tax statutes is challenging even more so considering new measures that have not been introduced yet such as Small Business Relief. Tax consultants are knowledgeable enough to evaluate your firm’s suitability, guaranteeing that you will fit all the criteria for relief.

They can walk you through the application procedure and help you create the relevant documentation correctly. In addition, the tax adviser knows about any changes in tax regulations to guarantee compliance and make the most of relief provisions. Businesses utilise their expertise to improve the fiscal position of firms by optimising tax products, enjoying exemption occasions and making informed choices in financial investment which enhances overall health. In today's complex corporate tax landscape, the advice of a tax expert is important for organisations looking to successfully use relief possibilities.

A list of the leading corporate tax consultants in Dubai:

1. CDA: CDA Accounting and Bookkeeping Services LLC is a company that provides accounting services on financial matters to various businesses around the country. CDA Accounting and Bookkeeping Services LLC is the ultimate one-stop solution for all accounting, bookkeeping, and VAT returns management solutions in Dubai, Abu Dhabi & across other regions of the UAE. They have developed into one of the leading accounting and auditing services companies in this nation by focusing on putting the financial futures of clients under control.

Web: https://www.cdaaudit.com/

1. AA Associate LLC: This is a UAE Certified Public Accounting Firm offering accounting and financial services to businesses throughout the country. AA Associate is a UAE-based management consultancy organization that provides economical value-added solutions to address all your business needs in one place. The organization adheres to the best practices of professional ethics and quality in its service provision. In order to keep up with the highly competitive business today, this company has a rapidly burgeoning number of experienced and dedicated professionals who approach things both creatively and commercially. The company offers VAT Compliant Accounting Services, Audit Services, Financial Management Advisory, Corporate Finance and Feasibility Study among other services.

Web: https://www.aaconsultancy.ae/

1. Riz and Mona Consultancy: It is a reputable business organisation situated in Dubai, UAE, with an exceptional portfolio. Riz and Mona Consultancy is a corporate advising organisation that offers experienced business, management, and corporate solutions to its valued clientele. The organisation not only delivers services in the UAE and through its well-established network of affiliate enterprises, but also around the world.

Riz and Mona provide comprehensive advice and assistance in forming corporations in accordance with local laws and regulations. Riz and Mona provide guidance on the following areas: Accounting Solutions, Auditing Solutions, Business Startup, Business Licencing and Registration, Government Affairs, Company Formation, Free Zone Company Formation, Regulations Compliance, Management Consulting, Intellectual Property, Organisation Excellence, Offshore Company Formation, Offshore Wealth Solutions, and Family Office Services for UAE and non-UAE nationals. 

Web: https://www.rizmona.com/

1. AL Rubaie Partners Chartered Accountants: It is one of the leading accounting and auditing firms in the UAE, serving to high-end clients in the Middle East. AL Rubaie Partners Chartered Accountants is a professional firm that offers auditing, accounting, and consulting services. AL Rubaie Partners Chartered Accountants was established on business ideals and has practised them from its inception in 1979. The organisation has devoted itself to the principles of its work, as well as high standards of excellence and professionalism, and is constantly up to date on changes in the business system. AL Rubaie Partners Chartered Accountants team delivers solutions that promote long-term business success. 

Web: https://www.arca.ae/

1. Mazars Group: is one of the top accounting and auditing organisations in the UAE. Mazars is a top international auditing, tax, and consultancy firm. As a combined partnership, the organisation operates as a single integrated team, using knowledge, scale, and cultural understanding to provide excellent and specialised audit and accounting services, as well as tax, financial advisory, consulting, and legal support. The organisation has the expertise and scale to service clients of all sizes and industries while remaining agile, personal, and unique in its approach. The corporation prides itself on its uniqueness. 

Web: https://www.mazars.com/

Conclusion

Business Tax Relief is a strategic tool to help small firms in the UAE by allowing them to pay no taxes under specific circumstances. As always, firms should seek expert counsel to fully comprehend and comply with such legal restrictions. For further information or a consultation on Corporate Tax and other related services, please contact CDA Accounting and Bookkeeping Services LLC. We'd be delighted to advise you through this procedure and help your business succeed under the new tax environment.

FAQ:

1. What tax benefits does the UAE provide?

The UAE differs from other nations on the basis of not taxing investors, corporations or individuals. Taxation is limited to oil companies and branches of foreign banks.

2. What are the exemptions from corporate tax in UAE?

Government entities, government-controlled entities, extractive and non-extractive natural resource businesses as well as non-resident individuals earning exclusively from UAE sources are subject to corporate tax exemptions.

3. In the UAE, who is under corporate tax?

The Federal UAE Corporate Tax Law is effective for financial years that begin on or after June 1, 2023, and covers all business and commercial activities. Exemptions exist for UAE government entities, subject to specified conditions.

4. How is corporate tax determined in the UAE?

The UAE corporate tax is charged at a rate of 9% on the net profit reflected in accounting statements. This calculation considers applicable deductions while excluding income that falls under exempt categories.

5. Is UAE Corporate Tax applicable uniformly across all Emirates?

Yes, the UAE Corporate Tax is a federal tax, ensuring its uniform application across all Emirates.

About the Author 

Auditfirms.ae

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