The UAE introduced a corporate tax law in December 2022, which will come into effect on June 1, 2023. The standard corporate tax rate is 9%, but there are a number of features that are designed to make the tax more manageable for small and medium-sized enterprises (SMEs).
Small Business Relief
One of the most important features for SMEs is the Small Business Relief (SBR). Under the SBR, businesses with annual revenues of up to AED 3 million are exempt from corporate tax. This means that SMEs with profits of less than AED 375,000 will not have to pay any corporate tax at all.
Zero-Rated Activities
The UAE government has also identified a number of activities that will be zero-rated for UAE corporate tax purposes. These activities include:
- Education and training
- Healthcare
- Social services
- Sports and recreation
- Culture and the arts
- Environmental protection
Simplified Compliance Regime
The UAE government has also simplified the compliance regime for corporate tax purposes. This means that SMEs will have a lower administrative burden when it comes to filing their tax returns.
Data Insights
According to a recent report by the UAE Ministry of Finance, there are over 2 million SMEs in the UAE. These SMEs account for over 90% of the private sector workforce and contribute over 60% of GDP.
The introduction of corporate tax is a significant change for the UAE business environment. However, the features that have been designed specifically for SMEs should help to mitigate the impact of the tax on these businesses.
Conclusion
The UAE corporate tax law is a complex piece of legislation, but there are a number of features that are designed to make the tax more manageable for SMEs. The SBR, zero-rated activities, and simplified compliance regime should all help to reduce the administrative burden on SMEs and allow them to focus on their core business activities.
If you are an SME in the UAE, it is important to understand the new corporate tax law and how it will affect your business. You should also contact a tax advisor to discuss your specific situation.