Can a free zone company claim Small Business Relief?

Article 3 – Additional Conditions for Small Business Relief A Resident Person that elects to apply the Small Business Relief must not be any of the following: 1. A Constituent Company of a Multinational Enterprises Group as defined in Cabinet Decision No. 44 referred to. 2. A Qualifying Free Zone Person.

Article 21 – Small Business Relief 1. A Taxable Person that is a Resident Person may elect to be treated as not having derived any Taxable Income for a Tax Period where: a. the Revenue of the Taxable Person for the relevant Tax Period and previous Tax Periods does not exceed a threshold to be set by the Minister; and b. the Taxable Person meets all other conditions prescribed by the Minister. 2. Where Clause 1 of this Article applies to a Taxable Person, the following provisions of this Decree-Law shall not apply: a. Exempt Income as specified in Chapter Seven of this Decree-Law. b. Reliefs as specified in Chapter Eight of this Decree-Law. c. Deductions as specified in Chapter Nine of this Decree-Law. d. Tax Loss relief as specified in Chapter Eleven of this Decree-Law. e. Article 55 of this Decree-Law. 3. The Authority may take the necessary measures to verify the compliance with the conditions of Clause 1 of this Article, and may request any relevant information or records from the Taxable Person within the timeline prescribed by the Authority. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 28 Chapter Seven – Exempt Income

● Any PE of a separate business unit of the MNE if the business unit prepares separate financial statements for the PE. Even if a UAE constituent company of an MNE has Revenue equal to or below AED 3,000,000 for the relevant Tax Period and all previous Tax Periods, the UAE constituent company will still not be able to elect for Small Business Relief. 3.1.2. Qualifying Free Zone Persons Small Business Relief will not be available to Qualifying Free Zone Persons. Qualifying Free Zone Persons already benefit from a 0% Corporate Tax rate on their Qualifying Income.10 A Qualifying Free Zone Person is a Free Zone Person that:11 ● ● ● ● Maintains adequate substance in the UAE; Derives Qualifying Income as specified in the relevant Cabinet Decision;12 Has not elected to be subject to Corporate Tax; Complies with the requirements under the Arm’s Length Principle and transfer pricing documentation; and ● Meets the following other conditions prescribed by the Minister;13 − The non-qualifying Revenue derived by the Qualifying Free Zone Person in a Tax Period does not exceed 5% (five percent) of the total Revenue of the Qualifying Free Zone Person in that Tax Period or AED 5,000,000 (five million dirhams), whichever is lower;14 and − Prepares audited financial statements. 3.1.3. Artificial separation Small Business Relief will also not be available where a Person artificially separates their Business into more than one entity in order to ensure that the Revenue of each entity is below the threshold for Small Business Relief.15 Where the FTA establishes that artificial separation has taken place, the Person will have to repay any unpaid Corporate Tax and any penalties that may be charged.16 How does Small Business Relief work? Small Business Relief allows eligible Resident Persons to elect to be treated as having no Taxable Income in a Tax Period where they have Revenue of less than or equal to 10 Article 3(2)(a) of the Corporate Tax Law. 11 Article 18(1) of the Corporate Tax Law. 12 Cabinet Decision No. 55 of 2023. 13 Article 5 of Ministerial Decision No. 139 of 2023. 14 Article 4 of Ministerial Decision No. 139 of 2023. 15 Article 6(1) of Ministerial Decision No. 73 of 2023. 16 Article 6(2) of Ministerial Decision No. 73 of 2023. Corporate Tax Guide | Small Business Relief | CTGSBR1 14