Guide to Corporate Tax Relief for Small Businesses in Dubai

Guide to Corporate Tax Relief for Small Businesses in Dubai

Welcome to our in-depth guide on the intricacies of business setup in Dubai, where opportunities abound for aspiring entrepreneurs. If you’re considering a small business venture, you’re in for a treat as the government extends a range of privileges to ease your entrepreneurial journey. One significant advantage lies in the tax relief system, strategically designed to support and incentivize small businesses.

In this blog, we will meticulously explore the Dubai tax system, emphasizing the benefits available for small businesses. By diligently following the prescribed procedures, you’ll gain valuable insights, providing a roadmap for navigating the vital business environment in Dubai.

Without further ado, let’s plunge into the core of our guide that sheds light on the tax relief opportunities that can propel your entrepreneurial dreams. Learn how harnessing these privileges can set the stage for a smooth and prosperous business setup in Dubai, aligning perfectly with your goals.

The tax system of the UAE

The UAE ushered in a new era on June 1st, 2023, with the introduction of the Federal Corporate Income Tax (CIT), bringing a host of enticing privileges for businesses. This development specifically impacts businesses based in the UAE, especially for individuals operating under a commercial license and non-resident juridical persons with a permanent establishment in the UAE. The CIT rates bring good news, with a 0% tax on taxable income up to USD 102,110 (AED 375,000) and a 9% rate kicking in on taxable income surpassing this threshold.

For small businesses setting up a shop in Dubai, especially those with modest investments but grand aspirations, this latest update in the tax system for the current financial year presents a significant advantage. The favorable CIT rates open doors for small enterprises, aligning with their ambitions and contributing to a more promising business landscape in Dubai.

Key Considerations for Small Business Relief (SBR) 

From June 1st, 2023, the Federal Corporate Income Tax (CIT)  in the UAE brings exciting privileges for businesses. However, it’s crucial to note that not all businesses fall under this provision. Qualified Free Zone Persons (QFZP) and entities within a Multinational Enterprise (MNE) group are excluded. MNEs, particularly large firms with a group revenue exceeding Dh3.15 billion, must comply with the UAE’s Cabinet Resolution No. 44 of 2020 by producing a country-by-country report.

Digging deeper into the legislation and the FTA’s guide, the Small Business Relief (SBR) scheme is tailored for resident entities. This encompasses firms based outside the UAE but operating within, individuals engaged in UAE businesses, and others specified by Cabinet decisions. It’s crucial to note that the relief isn’t accessible for non-residents, with a few exceptions.

A key facet is the inclusion of all business income, both domestic and international. The assessment considers revenues from asset sales as well. Whether income is from exempt or taxable sources, all are taken into account.

For individual residents, the threshold for corporate tax registration is an income of Dh1 million from business ventures. Those approaching Dh3 million in earnings and meeting SBR conditions can benefit from the relief. It’s important to clarify that earnings from salaries, personal investments, and property are not part of these assessments.

Choosing SBR is optional during the filing of returns. Business setup in Dubai on this path are exempt from determining taxable income or submitting detailed tax returns. Significantly, they are spared from corporate tax duties for fiscal years ending on or before December 31, 2026.

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Who is a resident person

Understanding the eligibility criteria for Small Business Relief (SBR) in the UAE is vital for businesses navigating the local tax landscape. A Resident Person, as defined for SBR, encompasses:

  1. a) A juridical person incorporated or established in, or recognized under, the applicable legislation of the UAE, including entities in free zones.
  2. b) A juridical person incorporated or established in, or recognized under the applicable legislation of a foreign jurisdiction but managed and controlled within the UAE.
  3. c) A natural person engaged in business activities within the UAE.
  4. d) Any other person as stipulated by a decision from the Cabinet or Finance Minister.

This classification is pivotal for businesses aiming to leverage SBR, highlighting the diverse entities eligible for this relief. Staying informed about the evolving regulations surrounding Resident Persons is essential for those looking to optimize their tax positions in the UAE. Our detailed guide provides valuable insights to help business setup in Dubai make informed decisions in line with the latest developments.

What to Look for When Choosing SBR

When you opt for Small Business Relief (SBR), the spotlight shifts to gross revenue, sidelining considerations like expenses and profits. An important note to be remembered is that if you choose SBR, you can’t offset current earnings with tax losses from earlier periods. However, those losses can be carried forward to offset future tax liabilities if SBR isn’t the chosen path.

SBR isn’t just for solo businesses; tax groups can jump on board, given their combined income stays below the Dh3 million benchmark over the current and previous tax periods. In this scenario, the assessment checks the collective revenue of the entire group, steering clear of individual member incomes.

Documenting your financial journey is key. From bank statements to business communications, ensure you keep a record for seven years after the relevant tax period. The good news? Electronic copies are perfectly acceptable, offering a convenient alternative to traditional records.

It’s time for a revenue check for business setup in Dubai! SBR could be your golden ticket to substantial tax advantages. For an in-depth exploration of these considerations and to navigate the realm of small business relief effectively, dive into our comprehensive guide.

What is the purpose of Small Business Relief 

Small Business Relief acts as a vital lifeline for businesses operating within a specific budget, enabling them to sustain their goods and services without the weight of hefty taxes. By reducing corporate taxes for small businesses, this initiative allows them to contribute a reduced amount in taxes, providing substantial support for their continued growth. This illustrates the nation’s commitment to bolstering business setups and highlights the innovative measures being implemented to drive economic progress. Small Business Relief stands as clear evidence of the government’s dedication to cultivating a thriving business environment and propelling enterprises forward through strategic financial assistance.

Marqueway: The Trusted Partner for Your Business Setup in Dubai 

Small business setups in Dubai, including the benefits of Small Business Relief, offer abundant opportunities for success. Before starting your business setup, Marqueway is here to simplify the legal procedures and guiding you every step of the way. For more valuable insights, follow us. Ready to make your dream business a reality? Contact Marqueway today.


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