U.A.E Ministry of Finance issue decision on small business relief on Corporate Tax

The Ministry of Finance (MoF) has issued Ministerial Decision No. 73 of 2023 on Small Business Relief for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law).

The decision is issued in accordance with Article 21 of the Corporate Tax Law, which treats the taxable person as not having derived any taxable income in a given tax period where the revenue did not exceed a certain threshold.

Small Business Relief is intended to support start-ups and other small or micro businesses by reducing their Corporate Tax burden and compliance costs. The Ministerial Decision on Small Business Relief specifies the revenue threshold and conditions for a taxable person to elect for Small Business Relief and clarifies the provisions of the carried forward Tax Losses and disallowed Net Interest Expenditure under the Small Business Relief scheme.

The Ministerial Decision on Small Business Relief stipulates the following:

1. Taxable persons that are resident persons can claim Small Business Relief where their revenue in the relevant tax period and previous tax periods is below AED3 million for each tax period. This means that once a taxable person exceeds the AED3 million revenue threshold in any tax period, then the Small Business Relief will no longer be available.

2. The AED3 million revenue threshold will apply to tax periods starting on or after 1st June 2023 and will only continue to apply to subsequent tax periods that end before or on 31st December 2026.

3. Revenue can be determined based on the applicable accounting standards accepted in the UAE.

4. Small Business Relief will not be available to Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups) as defined in Cabinet Decision No. 44 of 2020 on Organizing Reports Submitted by Multinational Companies. MNE Groups are groups of companies with operations in more than one country that have consolidated group revenues of more than AED3.15 billion.

5. In tax periods defined in the decision where businesses do not elect to apply for Small Business Relief, they will be able to carry forward any incurred Tax Losses and any disallowed Net Interest Expenditure from such tax periods, for use in future tax periods in which the Small Business Relief is not elected.

6. With regard to the artificial separation of business, the Ministerial Decision specifies that where the Federal Tax Authority (FTA) establishes that taxable persons have artificially separated their business or business activity and the total revenue of the entire business or business activity exceeds AED3 million in any tax period and such persons have elected to apply for Small Business Relief, this would be considered an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the Corporate Tax Law.

All Cabinet Decisions and Ministerial Decisions issued relating to the Corporate Tax Law are available on the Ministry of Finance's website: www.mof.gov.ae

U.A.E Ministry sets minimum turnover requirement for VAT registration

Those that offer services or sell goods that are non-taxable will also not need to get bothered by the extensive paperwork and reporting that the new tax system will require.The Ministry of Finance issued an announcement on Tuesday that effectively sets Dh375,000 as the minimum annual turnover requirement for companies that are required to register for value-added tax (VAT) which will be implemented in the UAE on January 1st, 2018.

Businesses in the UAE that barely make money every year - be they a streetside eatery, a shawarma vendor or a barber shop - may not need to go through the tedious process of registering for the value-added tax.

“Businesses with taxable suppliers over Dh375,000 will be required to register for VAT,” the announcement on Twitter reads. Those with net sales “below Dh375,000 but over Dh187,500,” will have the option to register starting October this year.There were no further details issued regarding the new policy, but one tax expert said that small businesses who may opt out of tax registration don’t have to charge VAT to their customers.

“The ministry has announced that those with revenue below 375K but over 187K will have an option to register. Which means that they may if they like, register under VAT. But if they don't then they do not have to collect VAT from their customers,” said Rakesh Pardasani, partner at audit and tax advisory firm RSM.

The ministry had earlier said that not all businesses, especially small companies, will need to register for the new tax policy. “In simple terms, only businesses that meet a certain minimum annual turnover requirement will have to register for VAT,” it said.

“We have made this decision to safeguard small businesses from the extensive documentation and reporting that a system like VAT requires.”

Pardasani, however, said that the revenue requirement set by the Ministry of Finance would mean that many small business owners will still be obliged to collect VAT.

“This number, however, if it is an annual number, appears to be very small and it may bring a lot of small businesses within the scope of VAT.”

He also pointed out that companies who make less turnover are still given an option to register for the new tax system. “Some may prefer [to register even if they are exempt] because if they don’t, they may not be able to claim back the VAT paid on their purchases.”

Starting next year, a 5 per cent levy will be charged on all supplies of goods and services, unless specifically exempted or zero-rated, in the UAE.  The levy will be implemented across the Gulf Cooperation Council (GCC) region, with some states given an option to join in on January 1st, 2019.

The ministry had earlier announced the start of its country-wide awareness campaign to educate various stakeholders on the collection of VAT. A VAT law has yet to be enacted, but the Federal National Council on Wednesday passed a draft legislation, the Tax Procedure Bill, that will pave the way for the collection of taxes.

Several briefings for entrepreneurs – from small and medium-sized enterprises (SMEs) to huge multinational organisations – will be held on different dates between April and May this year.

The sessions will explain to companies the rules of the new VAT system and cover the general application of the new VAT rules.

New Era for UAE Finance: Federal Debt Law Unlocks Sovereign Bond Market

Younis Al Khouri, the undersecretary at the Ministry of Finance, speaks during a news conference announcing the release of the statistical report on the Gulf Common Market at the Ministry of Finance in Abu Dhabi on August 2, 2016. Christopher Pike / The National

The UAE Federal Debt Law, which allows the Federal Government to issue sovereign bonds, has been approved and enacted.

The original article referenced the final stages of approval in the Federal National Council (FNC) with a key outstanding clause being the debt ceiling. This process concluded with the introduction of a comprehensive legal framework.

📜 Federal Debt Legal Framework

The key legislation that formalized the federal debt framework is:

• Federal Decree-Law No. (9) of 2018 Regarding Public Debt (amended by Federal Decree-Law No.¹ 26 of 2019 Regarding Public Finance): This law established the legal basis for the UAE Federal Government to issue sovereign debt instruments, such as bonds and Treasury Bills (T-Bills), on a federal level.²
• Federal Debt Management Office (FDMO): The FDMO was formally established within the Ministry of Finance to manage the issuance, servicing, and strategy of the federal public debt in coordination with the Central Bank of the UAE (CBUAE).³

📉 Impact on Fiscal Deficit Financing

The enactment of the Federal Debt Law achieved the objectives mentioned in the original article, particularly providing a new tool for financing the federal budget and addressing fiscal deficits caused by lower oil prices.

• Diversified Funding: The law provided the federal government with a diversified financing strategy, allowing it to raise funds without solely relying on drawing down deposits from the local banking sector or utilizing the assets of Sovereign Wealth Funds (SWFs), as the IMF had previously recommended.⁴
• Liquidity Management: The issuance of federal debt instruments, especially short-term Treasury Bills (T-Bills), aids the CBUAE in enhancing liquidity management within the banking system and developing the local debt market.⁵
• Market Development: The law supports the development of a highly efficient local financial market by introducing new, high-quality, zero-risk instruments for banks and investors.⁶
• Infrastructure Finance: The law allows the federal government to issue debt to finance infrastructure and governmental development projects approved by the Cabinet, contributing to sustained economic growth.⁷

📊 Debt Ceiling and Public Debt Management

The debt ceiling clause that was outstanding at the time of the original article has since been defined:

• Debt Ceiling Limit: The total amount of outstanding Public Debt is now capped at a level determined by a Cabinet resolution, but it cannot exceed 250% of the Government's Own Stable Revenue (as defined by the law).⁸
• Debt Management Strategy: The Minister of Finance is mandated to prepare and annually update a Medium-Term Debt Strategy (MTDS), covering the next three fiscal years, to ensure the debt portfolio aligns with cost and risk preferences while maintaining financial sustainability.⁹

While the IMF had forecast a rise in the UAE's consolidated (federal and emirate-level) debt-to-GDP ratio, the federal government's issuance has been managed prudently. Available data shows that the UAE's consolidated Government Debt to GDP was around 32.10% in 2024, still reflecting a healthy financial position compared to global standards.¹⁰

 

Ministry of Finance withhold July salaries of employees with incomplete Emirates ID details

 Pursuant to Circular No. 03 for 2016, issued on 3rd April, 2016, regarding the uploading of employee Emirates ID numbers in the Federal Financial System, an essential reference for all financial transactions and procedures at the national level, the Ministry of Finance, MoF, has announced that it will begin implementation of the circular, and will withhold July salaries of employees with incomplete or inaccurate national ID details.

The Ministry of Finance urged ministries and federal entities to ensure the completion of uploading the Emirates ID number, from the issuance date of the circular.

The Emirate ID number is an essential reference to speed up all government transactions for all federal government employees.

Mariam Mohammed Al Amiri, Assistant Under-Secretary for the Management of Financial Resources, stressed the need for all ministries and federal entities to ensure the completion of uploading the required data in the system. Having the correct data for all government employees in ministries and federal entities will facilitate transactions, and follow up on their requests in a fast and accurate manner.

Al Amiri also highlighted the link between the Emirate ID number and a number of significant federal government projects.

The Ministry had previously announced that all ministries and federal entities linked to the federal financial system must enter or correct the Emirates ID numbers for all of their employees, and those that adopt their own financial systems must complete the national ID details.