The United Arab Emirates (UAE) introduced a federal corporate tax on business profits from 1 June 2023. However, certain incentives and exemptions are provided for small and medium-sized enterprises (SMEs). Here are the key facts and updates on the topic:
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1. Corporate tax exemption for SMEs
- Small and medium-sized businesses with profit less than AED 375,000 (approx. USD 102,000) are completely exempt from corporate tax per year.
- This exemption is aimed at supporting small businesses and stimulating economic growth.
2. Tax rate for SMEs
Corporate Tax Exemption in UAE for SMEs
- If the profit of the enterprise exceeds Dh375,000 but remains within the limits AED 375,001–3,000,000, is applied preferential rate 0%.
- Profits over AED 3,000,000 are subject to the standard corporate tax rate of - 9%.
3. Benefits for free zones
- Companies registered in UAE free zones continue to enjoy the tax benefits provided by their status.
- However, such companies must meet certain conditions to remain eligible for the tax exemption, including conducting genuine economic activity and meeting “economic substance” requirements.
4. Businesses outside the UAE mainland
- Companies registered in free zones or territories outside the UAE mainland (such as Dubai, Abu Dhabi, Sharjah and other emirates) can continue to benefit from their current tax benefits.
5. Additional benefits and support
- The UAE government actively supports small and medium businesses by offering various financing programs. There are simplified registration procedures and other incentives.
- To receive benefits and exemptions, enterprises must be registered with the relevant authorities and maintain transparent financial records.
6. Important updates
- Changes in tax legislation are expected from 2025. These include possible changes in the criteria for SMEs and free zones.
- It is recommended to regularly check for updates on the official resources of the UAE Ministry of Finance or consult with experts such as Dubai@Whatox.comto stay updated with changes.
7. How to prepare?
- Make sure your company meets the SME criteria.
- Keep accurate records of your income and expenses to ensure you qualify for tax exemption.
- Seek professional advice to optimize your tax burden and take advantage of all available benefits.
If you have any further questions or need assistance navigating UAE tax laws, the team Dubai@Whatox.com provide expert advice and support.
