UAE Small Business Relief: Eligibility & MNE Threshold

Ministerial Decision No. 73 of 2023 provides relief to small businesses, aimed at easing their Corporate Tax burden and reducing compliance costs. The Decision stipulates a revenue threshold that qualifies a business for tax relief. It’s advisable for small businesses to seek expert guidance from Tax Consultants in the UAE to establish their taxability and properly access relief in compliance with UAE Corporate Tax law.

What Is the Qualifying Revenue Threshold?

The Decision stipulates that resident persons with revenue below AED 3,000,000 in the relevant tax period and each prior tax period are eligible for Small Business Relief. Where a taxable person exceeds the AED 3,000,000 revenue threshold in any tax period, they’re no longer eligible for the relief in that period. This threshold applies to tax periods starting from 1 June 2023, and remains valid for successive tax periods concluding on or before 31 December 2026.

Also check: Corporate Tax Services in UAE

How to Determine Revenue for Small Business Relief Purposes

Determining revenue for Small Business Relief purposes is based on the accounting standards recognized in the UAE. Businesses can use the same accounting standards applied in preparing their financial statements to determine their revenue. These standards provide guidance on properly recording and recognizing revenue, supporting accuracy and consistency in the resulting figure. Using the same accounting standards for both Small Business Relief eligibility and financial statement preparation streamlines the process and minimizes the risk of errors or discrepancies, while also making it easier for businesses to demonstrate compliance with the AED 3,000,000 revenue threshold.

Must check: Corporate Tax Registration

Exclusion From Small Business Relief Under Corporate Tax Law

Businesses categorized as Qualifying Free Zone Persons, or members of Multinational Enterprise (MNE) Groups, cannot access Small Business Relief. The Ministerial framework governing reports filed by multinational corporations defines an MNE Group as an association of businesses with activities across more than one country and aggregated consolidated revenue exceeding AED 3.15 billion. This means only resident individuals who don’t belong to an MNE Group, and aren’t Qualifying Free Zone Persons, are eligible for Small Business Relief. This AED 3.15 billion MNE Group threshold is a materially different, much higher figure than the AED 3,000,000 SBR eligibility threshold, and the two shouldn’t be confused.

Read more: How to Reduce Your Small Business Tax Burden

Carrying Forward Tax Losses and Disallowed Net Interest Expenses

Where businesses choose not to elect Small Business Relief during the tax periods specified under the Decision, they can carry forward any tax losses and disallowed net interest expenses incurred during those periods. These amounts can be used in future tax periods where Small Business Relief isn’t elected, giving businesses an opportunity to benefit from genuine tax savings later. This means losses and disallowed net interest expenses from tax periods where Small Business Relief wasn’t elected can be carried forward to reduce future tax liabilities. This provision is particularly helpful for startups and small businesses that may not have consistent revenue streams and may incur losses during their initial stages of operation.

Artificial Separation of Business Activity

Small Business Relief isn’t available to taxable persons who artificially separate their enterprises or business operations where their overall combined business activity revenue exceeds AED 3,000,000 in any tax period. Where the Federal Tax Authority (FTA) determines a taxable person has attempted to artificially divide their business specifically to claim Small Business Relief, this is treated as an attempt to gain an improper Corporate Tax advantage and is prohibited under the general anti-abuse provisions of the Corporate Tax Law. Businesses cannot rely on this kind of restructuring to access Small Business Relief where their genuine total revenue exceeds AED 3,000,000, and should maintain transparency and integrity in their financial reporting rather than engaging in practices that could be perceived as tax avoidance or evasion.

Worked Example: Artificial Separation Denied by the FTA

A consulting business generating AED 4,200,000 in genuine annual revenue splits its operations into two separately registered entities, each reporting AED 2,100,000 in revenue, below the AED 3,000,000 SBR threshold individually. Both entities operate from the same premises, share the same staff and management, and serve substantially the same client base, with no genuine independent commercial rationale for the split beyond staying under the relief threshold. Upon review, the FTA determines this constitutes an artificial separation of business activity specifically undertaken to access Small Business Relief improperly. Both entities’ SBR claims are denied, and the business becomes liable for Corporate Tax calculated on its genuine combined revenue, along with any applicable penalties for the improper claim. This illustrates why the artificial separation rule exists, and why a genuine commercial rationale, not just formal separate registration, is what actually determines whether a business structure will withstand FTA scrutiny.

Frequently Asked Questions (FAQs)

How Farahat & Co. Can Help

Farahat & Co., a trusted Tax Firm in UAE, helps small businesses assess Small Business Relief eligibility and maintain compliant, transparent financial reporting under UAE Corporate Tax law.

Contact Farahat & Co. today to discuss your Small Business Relief eligibility and requirements.