Small industries are the backbone of a thriving economy and UAE is mindful of it and its importance. By implementing relief measures for various small businesses, the UAE government aims to attract entrepreneurs, foreign investment and have a growing economy.
Understanding these reliefs and measures given to the small business owners, it helps to navigate them the confidence and stage for their industry and its success.
What is the relief that these businesses will get?
In April 2023, the ‘Small Business Relief’ was announced by the Ministry of Finance by introducing tax relief for those who fit under a certain norm. Small business owners in UAE with revenue under AED3 million can apply for tax relief which came in effect from June 1, 2023 and will extend upto end of 2026. Once the revenue exceeds the minimum revenue, the business will no longer cater to the Small business tax relief policy and need to give 9% tax then onwards.
Why was this decision made? How will it benefit the small business?
This decision was strategically made to diversify UAE’s income sources which were only limited to oils, allowing the country to maintain its status and economy. The new tax regime reaffirms UAE’s commitment to meeting international standards for tax transparency and prevent harmful tax practices.
What are the conditions in which one can claim this relief?
The small business relief only applied to a ‘resident person’. The Ministry of Finance also clarified that if FTA (Federal Tax Authority) establishes that taxable persons have artificially separated their business or business activities and have a revenue higher than the one stated, this would come under anti abuse rules of the Corporate Tax Law and may be set aside.
The UAE maintains a competitive environment for local and foreign investors with tax exemptions and reduced rates. It remains a viable business destination, even with the new tax, offering a favourable climate, especially for small businesses which can leverage the business-friendly ecosystem while adhering to the new rules.
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