Pursuant to the UAE CT law, a resident taxable person, being either a natural person or a juridical person, with revenues less than or equal to AED 3 million in a relevant tax period can elect to benefit from “small business relief”. Small business relief is available for tax periods that begin on or after 1 June 2023 and end before or on 31 December 2026, during which the revenues in the relevant tax period and all previous tax periods does not exceed AED 3 million.

An eligible taxable person that opts for the small business relief would benefit from both:

• administrative relief: it is not required to calculate its taxable income and files a simplified CT return; also, it is possible, in case of application of such relief, to prepare the financial statements on a cash basis rather than on an accrual basis; and
• tax relief: it is not required to pay any CT on income earned in the tax period.

Amongst the aspects to be considered in case of the small business relief application, an eligible taxable person that has elected for such relief:

• is required to register for CT;
• can file a simplified CT return;
• is not required to calculate taxable income;
• does not have to pay CT;
• is not required to comply with transfer pricing documentation requirements in the tax period for which it has elected for small business relief; and
• must comply with the arm’s length principle in transactions and arrangements with related

parties and connected persons under the transfer pricing rules.

Eligible taxable persons that meet the conditions for small business relief and wish to benefit from the small business relief must make an election in their CT return to benefit from such relief. The election must be made for each tax period that a tax return is filed for the relief to apply for that tax period.

If the Federal Tax Authority (FTA) determines that a business has artificially separated its business activities, and its overall revenue exceeds AED 3 million for the relevant tax period, it will not be eligible for small business relief. The business will have to repay any unpaid CT and may also be subject to a penalty by the FTA.