New tax rules will help small businesses in the UAE
The UAE is one of the most comfortable countries for doing business. The local authorities support entrepreneurship development by creating a flexible company growth environment. The good news for those wishing to start a business in the Emirates is the new tax rules.
From June 2023, the UAE has introduced incentives for small businesses. Companies with revenues not exceeding AED 3 million in a single tax period will now be exempt from corporation tax. The programme will run until the end of 2026.
Each company claiming the tax exemption must submit a report on its income. The verification will be carried out according to the accounting rules adopted in the UAE. Under the corporate tax charge law, if a business’s income does not exceed a certain amount, that amount will not be taxed.
However, the new rules will not apply to all companies and emirates. The programme does not target businesses registered in free economic zones or those that operate in countries other than the UAE. And the authorities intend to screen businesses to avoid abuse of the benefits strictly. For example, a company can divide its units in other states into different firms so that its income does not exceed the designated threshold of AED 3 million. If such cases come to light, the UAE authorities would be forced to impose penalties.
Since January, the Tax Service has opened registration for small businesses that want to participate in the government programme. Applications are submitted on the EmaraTax digital platform, which provides various tax services in the country.
For all other companies, the corporate tax is 9% and does not apply to employees and management’s salaries and personal income. This levy and its regulation are implemented following international standards. In addition, the UAE has provisions to avoid double taxation. Thus, local authorities want to provide the most flexible conditions for business and attract foreign investment. Companies in specific sectors, such as investment and pension funds, government organisations and others, are exempt from corporate tax.
Another innovation in 2023 is the abolition of the liquor tax. Previously, Dubai levied a 30% tariff on selling such drinks. This decision will reduce the price of alcohol in restaurants and bars and will be one of the incentives for tourism. The abolition of the tax will be in effect for one year.
