Corporate Tax Updates

11 April 2023

Manasi Dicholkar

Small Business Relief for businesses with revenue less than AED 3 million. No penalty for voluntary disclosures related to unintentional tax errors

Who is eligible for Corporate Tax relief?

• Taxable persons who are residents are eligible for Small Business Relief if their revenue for the current and previous tax periods is less than AED 3 million per tax period.

• The AED3 million revenue threshold will apply to two tax periods beginning on 1 June 2023 and will continue to apply only to tax periods ending on or before 31 December 2026.

• Small Business Relief is not automatic; therefore, a taxpayer who qualifies for this Relief must elect for its application and meet all other conditions.

Who is excluded from Small Business Relief eligibility?

• An eligible Free Zone Person

• A Constituent Company of a Multinational Enterprises Group (MNE Groups) with operations in more than one country and consolidated group revenues exceeding 3.15 billion AED.

Any artificial separation of Business or business activity to meet the AED 3 Million thresholds and to take advantage of the Small Business Relief, would be considered an arrangement to obtain a Corporate Tax advantage.

No penalty on voluntary disclosures related to unintentional tax errors rules the Federal Court

This decision distinguishes between an "unintentional error in calculating the tax" and a "voluntary disclosure of errors in the tax return or assessment," the Court ruling grants taxpayers a more lenient approach to amending their tax returns.

According to Cabinet Decision No. 40/2017, taxpayers who submit incorrect tax returns or assessments are subject to penalties. By treating certain voluntary disclosures as an inadvertent error correction, the court effectively eliminates the legal basis for imposing such penalties.