FTA released a Guide on the application of the Small Business Relief for Profit Tax

On August 28th, the FTA released a Guide on the application of the Small Business Relief for Profit Tax.

Earlier in April, in accordance with Article 21 of the Corporate Tax Law, the Ministry of Finance issued Resolution No. 73, outlining the benefits for small businesses with an annual revenue of AED 3 million (USD 816,882) or less from June 1, 2023, to December 31, 2026. Such individuals or entities, UAE residents, are considered exempt from corporate tax liability.

Key highlights from the guidance include:

To qualify for this relief, taxable individuals or entities, UAE residents, must first register for corporate tax payment. They can then opt for the relief by submitting a tax declaration. This choice needs to be made for each tax period. This means remaining registered for corporate tax, filing simplified tax declarations, and maintaining relevant documents and records will still be required.

As per Article 21 of the Corporate Tax Law, those opting for this relief are exempted from the requirement to maintain Transfer Pricing Documentation. However, adherence to the arm’s length principle is still necessary. For instance, any non-cash receipts, such as those from barter transactions, should be included in revenue at market value.

If a non-resident entity is in a country with an effective Exchange of Information Agreement with the UAE, including non-discrimination clauses based on the OECD/UN Model Convention, they may be eligible for this relief upon meeting the necessary conditions.

Detailed insights are provided regarding artificial business segmentation methods that taxpayers might employ to stay within the AED 3 million revenue threshold, including a review of facts and circumstances that the FTA will consider, along with some examples.

Full Guide u can find by this link.