New UAE corporate tax rules: Which businesses will benefit from relief?

Finance experts and businessmen in the UAE welcomed the newly announced tax relief that will support small businesses when the nine per cent corporate tax kicks in this June.

Ministerial Decision No. 73 of 2023 — announced on Thursday — specifies that businesses and individuals with revenues of Dh3 million or less can benefit from the small business relief initiative; thus reducing their corporate tax burden and compliance costs.

Kamal Vachani, group director and partner, Al Maya Group, said this is great news for investors that have been eyeing the UAE as their startup launchpad.

“It is quite empowering and inspiring that the Ministry of Finance (MOF) offers this relief to small businesses. This will enhance UAE’s position as an investment hub globally,” said Vachani.

Who will benefit?

Anurag Chaturvedi, CEO of Andersen UAE, said this relief seems to majorly benefit businesses in wholesale and retail trade, restaurants, administrative and support services, repair and maintenance services, other services, etc.

“It is interesting to note that it will only benefit businesses having a taxable income (i.e. adjusted net profit) of more than 12.50 per cent of revenue," he said.

Freelancers with annual revenue up to Dh3 million will also benefit if their business falls in the categories that will be specified in Cabinet decision which is yet to be prescribed, Chaturvedi said. He noted, however, that the corporate tax itself will not apply if the business of a freelancer does not fall under the categories specified in the law.

Harikishan Rankawat, chairman of the Institute of Chartered Accountants of India (ICAI), Dubai Chapter and partner at RNG Auditors, said businesses generating more than Dh375,000 net profit — but with revenues that are below Dh3 million — can get exemption from corporate tax.

“This is great news for the UAE’s micro, small and medium enterprises sector which is not only the largest contributor to the UAE economy, but they are also the largest group of employers in the UAE. This news will help them grow their business and reduce their tax burden,” said Rankawat.

Nimish Goel, partner at WTS Dhruva Consultants, agreed that this decision is going to be hugely beneficial for small companies including startups and independent freelancers.

“This benefit is only available until the end of 2026. Should any company despite being eligible under this decision decide not to opt for the benefit, would be able to carry forward the tax losses and disallowed net interest expenditure,” he added.

Jai Prakash Agarwal, secretary at ICAI Dubai Chapter, said the law stipulates that the turnover has to be below Dh3 million for both relevant tax periods and previous tax periods.

“Since the word used is ‘and’, the turnover has to be below Dh3 million both for the current and previous period. If your turnover in the previous period crossed Dh3 million but it dropped significantly to less than Dh3 million in the first corporate tax period, then also relief may not be available,” he said.

• Is your business income exempt from corporate tax?