The United Arab Emirates (UAE) Ministry of Finance has recently issued Ministerial Decision No. 73 of 2023 on Small Business Relief for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law) aimed at supporting small and micro-businesses, including start-ups, by reducing their corporate tax burden and compliance costs.

The decision, issued in accordance with Article 21 of the Corporate Tax Law, states that taxable persons will not be considered as having derived any taxable income where their revenue in the relevant tax period and previous tax periods is below AED3 million. The revenue can be determined based on the applicable accounting standards accepted in the UAE.

However, it is important to note that Small Business Relief will not be available to Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups). MNE Groups are groups of companies with operations in more than one country that have consolidated group revenues of more than AED3.15 billion.

The AED3 million revenue threshold will apply to tax periods starting on or after 1st June 2023 and will continue to apply only to subsequent tax periods that end before or on 31st December 2026.

The Ministerial Decision also specifies that where the Federal Tax Authority (FTA) establishes that taxable persons have artificially separated their business or business activity and the total revenue of the entire business or business activity exceeds AED3 million in any tax period, and such persons have elected to apply for Small Business Relief, this would be considered an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the Corporate Tax Law.

In conclusion, this measure is a step aimed at specifically supporting small and micro-enterprises in the country. It is a measure that will contribute to reducing their tax burden and compliance costs, promoting their growth, in the clear perspective of vital diversification and development of the country's economy, and still perfectly in line with the commitment of the Emirati Government to create an increasingly favorable business environment that attracts investments and promotes entrepreneurship.

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