A thorough guide on Small Business Relief (CTGSBR1), a program created to make the corporate tax regime easier for eligible enterprises to implement, has been made available by the UAE Federal Tax Authority (FTA). This handbook explores the key features of this relief, enabling small firms to confidently move through the initial phases of the tax system.
The businesses claim that every time the Federal Tax Authority releases a new guide, they frequently run into problems. For this reason, knowledgeable tax service providers advise businesses on the most recent tax developments.
- Instructions might be complex and drawn out.
- They could take a lot of time and be annoying.
- Modifications or adjustments to current regulations.
- It may lead to misunderstandings and confusion.
The following key concepts are explained in summary form in this guide:
- The introduction of Small Business Relief
- Eligibility criteria
- How it works
- How long is it available?
- Related compliance requirements
Key Benefits of Small Business Relief:
Decreased Compliance Burden: Small companies can avoid the time-consuming work of fully filing their tax filings and estimating their taxable revenue. They may now concentrate on operations and growth as a result.
Tax-Free Period: Eligible enterprises with annual revenue under AED 3 million can operate effectively tax-free until December 31, 2026. This results in substantial cost savings as well as less stress.
Simplified Record-Keeping: Companies can further streamline their financial administration by implementing cash-based accounting.
Qualifiable Standards
Resident Taxable Person: As long as they are residents of the United Arab Emirates for corporate taxation, both natural and juridical persons (businesses) are eligible.
Revenue Threshold: During the relevant tax period and all prior periods, the business’s total revenue must have been AED 3 million or less.
The UAE’s Small Business Relief program demonstrates a strong dedication to fostering the expansion and prosperity of small enterprises. Entrepreneurs and startup businesses can take advantage of this tax relief and prosper in the new corporate tax environment by being aware of the rules and qualifying requirements.
Exemptions: Groups of Multinational Enterprises (MNEs): MNE-affiliated businesses are not qualified for Small Business Relief.
Eligibility conditions for small business relief
Qualifying Free Zone Persons
Companies not eligible are those that currently enjoy a zero percent corporate tax rate on qualifying income within free zones.
According to the guide, “Any eligible taxable person with revenue below or equal to AED 3,000,000 in the relevant tax period that ends or before 31 December 2026 can elect to be treated as having no taxable income in that period.” This includes resident taxable persons as well as natural persons. They won’t have to figure out their taxable income or finish their entire tax return.
A person must be a resident person for corporate tax purposes to be eligible to elect for small business relief. If their revenue in the applicable tax period and any prior tax periods is less than or equivalent to AED 3,000,000.
The only exclusion from this small company aid is that qualifying free persons and members of MNEs are not eligible.
Restriction to Tax Periods Ending on or before 31 December 2026
Relief for small businesses will be granted for the tax period commencing on or after June 1, 2023. Relief from this tax will be granted for tax periods ending on or before December 31, 2026. The revenue in the applicable tax period and all prior tax periods must be less than or equal to AED 3,000,000 to meet this eligibility requirement.
An illustration of how to choose small business relief
Mr. X is based in Abu Dhabi and runs his business from there.
For corporation tax, he is a resident person. His tax period ends on December 31, 2025, and he began trading on January 1 of that year. AED 2,000,000 was Mr. X’s revenue for the most recent tax period, which ended on December 31, 2025.
Because Mr. X is a natural person and has a business or activity that generates revenue over AED 1,000,000 but less than AED 3,000,000 for the 31 December 2025 tax period, he is qualified to receive Small Business Relief.
Since the 2025 tax period is Mr. X’s first year of operation, he has not exceeded the revenue threshold from prior periods.
He needs to make an election in his tax return if he wishes to take advantage of the Small Business Relief.
Examples of non-resident persons
ABC Ltd. is a US-incorporated business that serves its clients in the United Arab Emirates from its office in Dubai. For corporate taxation, ABC Ltd. is a non-resident person. ABC Ltd. generated revenue of AED 2,500,000 in its most recent tax period, which ended on December 31, 2024. Of this revenue, AED 1,000,000 was attributed to its Dubai office.
Regardless of revenue or having an office in Dubai, ABC Ltd. is not eligible for small business relief because it is a non-resident person.
How can ebs chartered accountants help your business?
ebs chartered accountants is aware of the difficulties companies have navigating the UAE’s new corporation tax law. With our in-depth understanding of small company relief, our staff can advise businesses on their eligibility. We provide a whole range of services to assist companies of all sizes in adhering to, comprehending, and taking advantage of this tax reduction initiative. Our staff of committed and knowledgeable tax experts is an expert in small business relief and has a thorough understanding of the corporate tax environment in the United Arab Emirates.
Here are a few areas of our small business relief expertise:
- Eligibility determination
- Assistance with record-keeping
- streamlined filing of tax returns
- Compliance advice;
- Tax planning techniques
Conclusion
For corporation tax purposes in the UAE, small business residents are eligible for small business assistance. This concession is intended to facilitate the implementation of the corporation tax regime. Relief for small businesses lessens compliance requirements, but it’s important to read the guidance carefully. The technical language and shifting concepts in the guide are frequently challenging to understand. But you don’t need to worry about it because our staff will save you.
ebs chartered accountants is a top accounting and bookkeeping company in Dubai, United Arab Emirates. We have been assisting numerous companies in maintaining compliance with the UAE tax code. With the best user experience, we have more than 200 active clients.
In addition, we offer other services, including bookkeeping and accounting, auditing, due diligence audits, and much more. Thus, get in touch with us right now to arrange a free consultation.
