Khaleej Times, Tuesday, Jan 24, 2023 | Rajab 2, 1444
How corporate tax supports 350,000 SMEs in UAE
Emirates:
The corporate tax regime is specifically designed to support small- and
medium-sized businesses (SMEs) so that they can continue to thrive and drive the
country’s growth in years to come, says a government official.
The spokesperson of the Ministry of Finance said the introduction of the
corporate tax will support 350,000 SMEs in the UAE so that they could remain
competitive in the market.
“To support SMEs, there will be a zero per cent tax rate for taxable profits up
to Dh375,000. The zero per cent threshold has been included in recognition of
the vital role of start-ups and SMEs in the UAE’s economy,” the spokesperson
told Khaleej Times.
In addition to a 0% CT rate, he said SMEs with revenue below a certain threshold
can claim ‘small business relief’ and be treated as having no taxable income
during the relevant tax period and is provided relief in the form of simplified
financial and tax reporting obligations.
To claim small business relief, an election must be made to the FTA.
Additionally, businesses that has claimed the small business relief will not
have to comply with the regime’s transfer pricing documentation rules.
9% competitive rat
To keep pace with the requirements of a competitive market economy and the
global minimum tax rate, the corporate tax regime will be effective for
financial years starting on or after June 1, 2023 and will levy a standard rate
of nine per cent.
The new CT regime levies a competitive rate of nine per cent and provides a
range of exemptions and relief to accommodate domestic and cross border
investment.
“The new CT regime also minimises administrative challenges for SMEs. The UAE
businesses will need to file only one CT return per tax period and any related
supporting schedules need to be prepared and submitted to the Federal Tax
Authority (FTA) for each tax period,” the spokesperson said.
While taxpayers should generally prepare their financial statements and
determine their taxable income on an accruals basis, certain categories of
individual entrepreneurs and SMEs can be allowed to prepare their financial
statements on a cash basis.
Generous timeframe given
Taxpayers are given a generous timeframe of up to 21 months from the start of
their financial year to prepare for filing and making tax payments. This
timeline reflects the government’s commitment to ensure that the implementation
of the CT regime is as smooth as possible.
“All companies, whatever their size, will also be able to carry forward any tax
losses indefinitely to offset against future taxable income. For SMEs based in
Free Zones, their tax treatment remains unchanged,” according to the
spokesperson.
For many SMEs the prospect of the new CT regime may be daunting. However,
extensive public consultations have been carried out with key SME stakeholders,
and these consultations will continue during the implementation of CT to ensure
that businesses are fully ready.
Public awareness workshops will also be carried out in every emirate of the UAE
throughout the period from January 2023 to June 2023 and SMEs can access a wide
range of support including guides, manuals, a call centre, webchat facility and
SME-focused initiatives,” the spokesperson said.