Guide on Small Business Relief (SBR)
 

Guide on Small Business Relief (SBR)

August 29, 2023by admin0

Federal Tax Authority has released a Guide on Small Business Relief (SBR) to provide general guidance on what it is, who is eligible for it, how it works, how long it is available for and related compliance requirements. Following are the key highlights of the guidance- 

  1. SBR reduces the compliance obligations faced by small Businesses by eliminating the burden to calculate and pay Corporate Tax and file full-fledged corporate tax return. Taxable Persons electing for SBR will be required to register for corporate tax and file a Simplified Tax Return. 
  1. Revenue Threshold: – Any Resident Taxable Person (either a Natural Person or a Juridical Person) with Revenue below or equal to AED 3,000,000 in a relevant Tax Period and all previous Tax Periods shall be eligible for SBR. The threshold would apply to tax periods, starting on or after 1st June 2023 and ending on or before 31st December 2026.  
  1. Calculation of Total Revenue for SBR: -Revenue includes income generated from sale of goods or services and any other income. Exempt income shall also be included for ascertaining total revenue threshold. However, VAT shall be excluded while deriving total revenue.  
  1. SBR for Individuals: – SBR can also be elected by Individuals deriving income from Businesses or Business Activities exceeding AED 1,000,000 threshold during a Gregorian calendar year and subject to Corporate Tax. However, Individuals shall only take into account foreign income that is related to their taxable Business or Business Activity conducted in the UAE (in addition to their domestic income) for calculating the revenue threshold of AED 3,000,000. 
  1. Exclusions: – The following persons cannot elect for SBR: – 
  • Qualifying Free Zone Person  
  • Members of MNE group crossing consolidated group revenues of AED 3.15 billion 
  • UAE branches/permanent establishments of a foreign company 
  1. SBR is an optional relief and Resident Persons shall elect for this relief every year through their Tax Return. Once the Tax Return for the relevant Tax Period has been submitted with no election to SBR, there would be no possibility to claim this benefit at a later stage. 
  1. Resident Person who elects for SBR cannot avail the following for the Tax Period in which such relief is elected: – 
  • It cannot accrue and utilise any Tax Losses for the relevant Tax Period. 
  • It cannot accrue and utilise excess Interest Expenditure for the relevant Tax Period. 
  • General Interest Deduction Limitation Rule shall not apply. 
  • Business Restructuring Relief and Transfer within a Qualifying Group relief shall not apply. 
  • Deductible expenditure rules shall not apply
  1. SBR for Tax Group: Tax Group can elect for SBR. Since, Tax group is considered as a single Taxable Person, the Revenue threshold of AED 3,000,000 will apply to the Tax Group as a whole. Further, consolidated revenue shall be considered after netting of intra-group transactions. 
  1. Transfer Pricing (TP) Requirement: Taxable person electing for SBR is not required to maintain TP documentation, i.e., it is not required to file a disclosure containing information regarding its transactions and arrangements with its Related Party along with its Tax Return or to maintain local and master file. However, it required to consider and comply with the Arm’s Length Principle (ALP)
  1. Records required to demonstrate Revenue: Taxable persons electing for SBR are required to maintain certain records such as bank statements, sales ledger, invoices or other records of daily earnings to demonstrate revenue. Further, there is no requirement that documents are to be maintained in their original format and can be maintained in an electronic form
  1. Artificial Separation– If the FTA determines that a business has artificially separated its activities and its overall revenue exceeds AED 3,000,000 for the relevant Tax Period, then such business shall not be eligible for SBR and will have to repay corporate tax that it would have owed if the business has not been artificially separated. FTA may also impose penalty on the such taxable person. FTA will undertake an artificial separation test and review the activity in order to determine- 
  • Whether the separation was undertaken for a valid and genuine commercial purpose 
  • Whether substantially the same business or business activity is being conducted 

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REACH USHeadquarters
Onboard the UAE’s one of most trusted advisory firm offering various tailored services to support all upcoming & existing businesses across the UAE.
OUR LOCATIONSWhere to find us?
FAME Advisory: 412, Office Court Building - D79, Oud Metha, Dubai, UAE


TMSL (Collaboration Partner): 501-A, Pinnacle Corporate Park Next to Trade Centre, BKC, Bandra East Mumbai, Maharashtra, India

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To get the latest news and updates from FAME Advisory, join our social media now.

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