The Ministry of Finance (MoF) in the United Arab Emirates (UAE) has decided to grant major corporate tax relief to small companies, freelancers, and startups, starting from 1 June this year in order to create an environment that will help them grow without any additional burden.
The eligible businesses and individuals must have AED 3 million or less in revenue to avail of this relief. Under this scheme, eligible establishments can claim ‘Small Business Relief,’ which will lower the corporate tax they must pay.
According to the Ministerial Decision No. 73 of 2023, businesses and individuals with revenue lower than the above-mentioned number can utilize this relief.
Last year, the UAE government had announced that it would impose nine percent tax on profits of businesses making more than AED 375,000 in revenue.
Meanwhile, those who do not apply for this relief are allowed to carry forward their tax losses to reduce their taxes in the future.
It is worth mentioning here that this scheme is not for everyone. Eligible free zone persons as well as members of Multinational Enterprises Groups (MEGs) having operations in more than one country with total revenue over AED 3.15 billion will not be eligible.
Also, if a business makes over AED 3 million and tries to avoid taxes by splitting the company into smaller parts, it is illegal. This move is called the “artificial separation of the business.” Thus, businesses involved in such activity will not be eligible for Small Business Relief as well.
