What Are the Reliefs Given to Small Businesses From UAE Corporate Tax?

As a small business owner in the UAE, there is no doubt you are always looking for ways to optimise your operations and save money. One of the major costs incurred by businesses operating in the country is corporate tax. Thankfully, the government has put together numerous reliefs that can be availed by small businesses to reduce their financial burden when it comes to taxation. In this blog post, we share an overview of what these reliefs are and how they can help small businesses cut back on taxes!

Overview

Under the Corporate Tax Law, certain businesses with a turnover of income below Dh 375,000 are not required to pay corporate tax according to the Ministry of Finance [1]. This includes companies that are classified as ‘Small and Medium Enterprises’ (SMEs) by the government. These SMEs are subject to simplified compliance obligations, enabling them to save time and money when it comes to taxation.

Small businesses can also avail additional tax reliefs such as an accelerated depreciation allowance of up to 20% on certain assets acquired for business use and a 6-month grace period for payment of corporate taxes, depending on their turnover. Furthermore, businesses that grow rapidly in size can make use of the Corporate Tax in UAE Outsourcing services offered by tax consultants Dubai. These professionals will help businesses set up efficient tax systems, manage their finances and ensure complete compliance with the Corporate Tax Law.

Overall, small businesses in the UAE have access to several reliefs when it comes to corporate taxes. These reliefs can significantly reduce a business’ financial burden, allowing them to focus more on the growth and development of their operations.

Reduced Tax Rates

Small businesses in UAE can take advantage of tax reliefs and reduced Corporate Tax rates. Corporate taxes are imposed on all legal entities established, registered or carrying out business activities within the UAE. The Corporate Tax in UAE is applicable to Small and Medium-sized Enterprises (SMEs) is different from large companies.

Under the Corporate Tax regulations, SMEs can choose to be taxed at a reduced rate of 9% compared to the regular Corporate Tax rate applicable in the UAE [2]. To be eligible for the Corporate Tax relief, SMEs must make an election with the Federal Tax Authority (FTA). Upon making this election, SMEs will not have to comply with any transfer pricing documentation rules.

For businesses that are not eligible for Corporate Tax relief, outsourcing their taxation activity to a tax consultant or an offshore specialist can be beneficial [2]. This approach can help reduce the Corporate Tax rate and improve overall savings on expenses.

To keep up with changing international economic trends, Corporate Tax rate in UAE may also be subject to change periodically. It is important for SMEs to stay informed of any Corporate Tax in UAE updates and take advantage of available tax reliefs.

Generous Timeframe Given

The United Arab Emirates (UAE) is a tax-friendly nation, with tax exemption on several types of income and no taxes on personal income. However, there are certain corporate tax obligations that need to be taken into consideration.

Corporate tax in the UAE is regulated by the Federal Tax Authority (FTA) and is set at a flat rate of 55% on net profits. Small businesses in particular, however, can benefit from tax reliefs provided by the UAE government.

The tax reliefs that small businesses are eligible for include tax holidays, tax deductions, tax credits and exemptions on certain activities or entities For tax holidays, companies can receive 100% tax exemption on their net profits for the first 3 years after they start a new project. Tax deductions can also be claimed on expenses such as salaries, rent and office materials. Lastly, tax credits may be granted to small businesses that invest in research and development activities or purchase equipment with tax-free status.

Moreover, tax outsourcing exemptions can be granted to certain entities or activities by the FTA. This includes exemption on tax liability to some foreign branches and tax-free status for certain types of investments such as venture capital funds and Islamic bonds (sukuk).

Conclusion

In addition, businesses in Dubai can consult with a tax consultant to help them understand tax outsourcing regulations, determine their tax liability and take advantage of tax reliefs. Additionally, businesses can use a corporate income tax calculator to estimate their corporation tax liability. Overall, the UAE provides generous tax reliefs to small businesses that help reduce the tax obligations of businesses in Dubai. To make sure your business is taking full advantage of tax regulations, it is important to seek advice from tax consultants and use Dubai corporate tax calculators. Corporate Tax UAE has a team of diligent lawyers and tax consultants who provide unmatched support to businesses for all their tax related queries and hassles.