Sep 29, 2024
UAE Corporate Tax: What Small Businesses Must Do to Get 3-Year Tax Relief!
With the introduction of corporate tax in the UAE, many small businesses are now trying to get a grip on this new landscape and balance compliance with possible relief programs. The UAE's Small Business Relief initiative may serve as a great avenue wherein businesses earning less than AED 3 million a year can get tax relief until the end of 2026.
What is It and Why Does It Matter?
It was introduced by the UAE on its path to international best practices for reasons that include, among others, increased transparency and diversification of the economy. At the same time, the government ensures that small businesses, startups, and growing sectors are supported through the Small Business Relief program, bringing their tax burden as low as possible. This incentive is part of the country's policy in promoting entrepreneurship and enabling small firms to survive hostile competition in the market economy.
For Whom Does Small Business Relief Apply?
Those entities whose respective revenue is below AED 3 million in the financial year;
The new startups or business incorporations engaged in businesses related to F&B, IT services, healthcare, and consulting.
Those businesses can normally be operational but have low or maybe no income or are in growth stages.
It is important to note that where the revenue exceeds AED 3 million in a year, a business shall not qualify for the relief in that tax year.
Major Achievements of the 3-Year Tax Exemption
No Payment of Corporate Tax: The eligible companies are exempted from paying corporate tax until 31st December 2026.
Cash Flow Management: Small businesses, without the burden of tax-fee payments, could reinvest their profit to expand the operations.
Incentivizing New Startups: This provides an avenue for entrepreneurs to plunge into new businesses since they would not have an immediate tax obligation.
Affordable Compliance: Even though they are exempt, businesses must retain records sufficient to support their eligibility and, thus, professional bookkeeping and accounting services.
Compliance: What Small Businesses Must Do
Even with tax relief, there are things to be done for the businesses to be compliant:
Corporate Tax Registration: Every company needs to register with FTA, the Federal Tax Authority, even if they qualify for a relief.
Maintain Proper Records: Books of accounts and bookkeeping shall be done in a manner to substantiate the eligibility criteria for relief. Annual Reporting: The businesses shall prepare and submit reports to FTA, confirming that revenues remain below AED 3 million. VAT Registration: If required under the law, such businesses have also to comply with the Value Added Tax and file VAT returns well in time. Audit and Review: The businesses are required to seek the services of professionals for accounting and taxation to ensure complete compliance with laws and regulations and avoid penalties.
Why is professional help required?
The rules and regulations regarding corporate tax and VAT are hard to comprehend by small businesses and start-ups. Professional accounting firms would, in this case, assist in the following:
Ensuring the correctness of the financial reporting and book-keeping.
Assisting with tax registrations and orderly submissions.
Advising on the best options to enhance cash flow in business and reduce expenses.
Take Action to Claim Your Relief
The UAE's Small Business Relief program indeed brings a well-deserved and timely opportunity for companies to minimize their tax burden while focusing on growth. The key toward benefiting from the relief, however, lies in early registration and timely compliance supported by efficient financial management.
Small businesses in Dubai, and indeed across the UAE, should not delay their registration for corporate tax. This is beneficial as, with proper planning and seeking of professionals, it will ensure compliance, hence a good positioning to take advantage of the reliefs available to propel their growth ambitions.
