How corporate tax supports SMEs in UAE

The UAE Ministry of Finance announced in January 2022 that it would impose a federal corporate tax at a competitive rate of nine percent on the net profits of the businesses, which will be effective on or after June 1, 2023. Corporate tax will only apply to foreign companies and individuals who conduct regular trade or business in the UAE.

The proposed rate is lower than those of other jurisdictions, which is important to highlight because it benefits Small and Medium-sized Enterprises (SMEs) greatly. A zero-tax rate will apply to taxable profits up to Dh375,000 in order to help small and medium-sized businesses.

In recognition of the crucial role that start-ups and SMEs play in the economy of the UAE, the 0% threshold has been added. SMEs can also receive "small business relief" and be classified as having no taxable income for the applicable tax period, in addition to a 0% CT rate. They are also given relief through streamlined financial and tax reporting requirements.

A request must be submitted to the FTA to seek relief for small businesses. Companies that have benefited from the small business relief will not be required to follow the regulations governing transfer pricing documentation.

Taxpayers are allowed a significant period to plan for submitting their taxes and paying them, up to 21 months from the beginning of their financial year. This timeline shows the government's effort to ensure the transition to the CT system.

Between January 2023 and June 2023, public awareness seminars will be held in each of the UAE's seven emirates. SMEs can also access various resources, including manuals, guidelines, a call center, a webchat feature, and initiatives specifically geared to them.