A UAE resident taxable person's revenue for both the current tax period and the previous tax period was AED 2.8 million, and the current tax period begins on or after 1 June 2023 and ends on or before 31 December 2026. Under UAE Corporate Tax Law's Small Business Relief (Article 21 of Federal Decree-Law No. 47 of 2022, as detailed in Ministerial Decision No. 73 of 2023), what happens if the taxable person makes a valid election for this relief for the current tax period?
- The taxable person is treated as if it derived no taxable income for the tax period and has no Corporate Tax liability
- The taxable person automatically receives Small Business Relief without needing to make any election
- The taxable person still owes Corporate Tax on income above AED 375,000, because Small Business Relief only removes the registration obligation
- The taxable person permanently loses eligibility for Small Business Relief in all future tax periods because its revenue is approaching the AED 3,000,000 threshold
Why A? And why not the others?
Correct answer: A. The taxable person is treated as if it derived no taxable income for the tax period and has no Corporate Tax liability
Article 21 lets a resident taxable person whose revenue in the current and previous tax period does not exceed AED 3,000,000 elect Small Business Relief, and Ministerial Decision No. 73 of 2023 confirms that an effective election means the taxable person is treated as if it derived no taxable income for that tax period, eliminating Corporate Tax liability for it. Option B is wrong because the relief is elective, not automatic — the taxable person must actively choose it on their return. Option C is wrong because the relief operates on taxable income itself, not merely on registration formalities, so a valid election removes the liability entirely rather than leaving a 9%-band charge in place. Option D is wrong because eligibility is reassessed each tax period based on that period's and the prior period's actual revenue; being close to the AED 3,000,000 ceiling does not disqualify a taxable person unless revenue actually exceeds it.
Source: UAE Federal Decree-Law No. 47 of 2022, Article 21; Ministerial Decision No. 73 of 2023 (Small Business Relief)