The UAE government has recently updated the Corporate Tax Law to provide relief for small businesses. The new law, which came into effect on June 1, 2023, includes a number of changes that are designed to make it easier for small businesses to comply with the tax law and reduce their tax burden.
In addition to the changes to the Corporate Tax Law, the UAE government has also introduced a number of other measures to support small businesses. These include a new loan guarantee scheme and a tax deduction for training costs.
One of the most significant changes is the introduction of a new small business relief scheme. Under this scheme, small businesses with annual revenues of up to AED 3 million are exempt from paying corporate tax.
The new updates to the Corporate Tax Law are a positive development for small businesses in the UAE. The relief scheme will help to reduce the tax burden on small businesses, and the other measures will make it easier for them to comply with the tax law.
The new law also makes it easier for small businesses to calculate their taxable income. Small businesses can now choose to use the accrual basis of accounting, which is more accurate but also more complex. The law also relaxes the requirements for keeping financial records.
The UAE government has recently updated the Small Business Relief Corporate Tax Guide (CTGSBR1) to provide more clarity and flexibility for small businesses. The updated guide includes a number of changes, including:
- Annual revenue for eligibility is AED 3 million.
- A new option for small businesses is to calculate their taxable income using the accrual basis of accounting.
- A relaxation of the requirements for keeping financial records.
Eligibility Criteria:
- To be eligible for Small Business Relief, a business must meet the following criteria:
- It must be a resident person in the UAE.
- It must be managed and controlled in the UAE.
- Its annual revenue must not exceed AED 3 million.
Tax Relief
If a business is eligible for Small Business Relief, it will not be required to pay any corporate tax on its income. However, the business will still be required to file a tax return and keep financial records. The Small Business Relief Corporate Tax Guide (CTGSBR1) is a guide issued by the Federal Tax Authority (FTA) of the United Arab Emirates (UAE) that provides information on the eligibility criteria and requirements for small businesses to claim tax relief under the Corporate Tax Law.
To be eligible for Small Business Relief, a business must meet the following criteria:
- It must be a resident person in the UAE.
- Its annual revenue must not exceed AED 3 million.
- It must be managed and controlled in the UAE.
There are a number of other conditions that businesses must meet to be eligible for Small Business Relief. These conditions include:
- The business must be a natural person, a partnership, or a limited liability company.
- The business must not be a subsidiary of a non-resident company.
- The business must not be a financial institution or a holding company.
Calculation of Taxable Income
Small businesses that are eligible for Small Business Relief can choose to calculate their taxable income using either the cash basis of accounting or the accrual basis of accounting. The cash basis of accounting is a simpler method and is based on when money is received or paid. The accrual basis of accounting is more complex and is based on when revenue is earned or expenses are incurred.
Recordkeeping Requirements
Small businesses that are eligible for Small Business Relief are required to keep financial records for a period of seven years. The records must be sufficient to enable the tax authorities to determine the business’s taxable income.
Conclusion
The new update to the Small Business Relief Corporate Tax Guide provides more flexibility and options for small businesses in the UAE. Businesses that are considering applying for Small Business Relief should carefully review the updated guide to determine if they are eligible.
If you are a small business owner in the UAE, you should contact a tax advisor such as ebs to discuss whether you are eligible for Small Business Relief. A tax advisor can help you understand the eligibility criteria and requirements, and they can also help you with the calculation of your taxable income and the preparation of your tax return.
ebs is accessible to help you find out about bookkeeping in the UAE. ebs likewise offers services, for example, accounting and bookkeeping services, VAT services, Auditing, Due Diligence audit services, and many more.
Feel free to contact us with any additional inquiries or requests for accounting services. A free discussion will be given to you by our specialists, who will answer your request immediately.