How UAE Corporate Tax Law Supports SMEs.
UAE Corporate Tax regime is specifically designed to support SMEs so that they can continue to thrive and drive the country’s growth.
The introduction of the corporate tax will support 350,000 SMEs in the UAE so that they could remain competitive in the market.
To support SMEs, there will be a zero percent tax rate for taxable profits up to Dh375,000.
The zero percent threshold has been included in recognition of the vital role of start-ups and SMEs in the UAE’s economy.
In addition to a 0% CT rate, SMEs with revenue below a certain threshold can claim ‘small business relief’ and be treated as having no taxable income during the relevant tax period and is provided relief in the form of simplified financial and tax reporting obligations.
To claim small business relief, an election must be made to the FTA.
Additionally, businesses that has claimed the small business relief will not have to comply with the regime’s transfer pricing documentation rules.
The corporate tax regime will be effective for financial years starting on or after June 1, 2023 and will levy a standard rate of nine percent.
The new CT regime levies a competitive rate of nine percent and provides a range of exemptions and relief to accommodate domestic and cross border investment.
The new CT regime also minimises administrative challenges for SMEs.
The UAE businesses will need to file only one CT return per tax period and any related supporting schedules need to be prepared and submitted to the Federal Tax Authority for each tax period.
While taxpayers should generally prepare their financial statements and determine their taxable income on an accruals basis, certain categories of individual entrepreneurs and SMEs can be allowed to prepare their financial statements on a cash basis.
Moreover, taxpayers are given a generous timeframe of up to 21 months from the start of their financial year to prepare for filing and making tax payments.
This timeline reflects the government’s commitment to ensure that the implementation of the CT regime is as smooth as possible.
All taxable persons, whatever their size, will also be able to carry forward tax losses incurred after the commencement of the corporate tax regime indefinitely.
The amount of tax loss used to reduce the taxable income for any subsequent tax period cannot exceed 75 per cent of the taxable income for that tax period.
Throughout the period from January 2023 to June 2023 SMEs can access a wide range of support including guides, manuals, and webchat facility.
Source: Khaleej Times