The UAE increases tax threshold for startups

UAE: 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 startups 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.stratThe Ministerial Decision on Small Business Relief stipulates the following:1. Taxable persons who are resident persons can claim Small Business Relief where their revenue in the relevant 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, 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 Organising 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.

UAE firms keener to invest in the metaverse

Organizations in the UAE are paving the way ahead of their global counterparts in fulfilling their digital transformation ambitions, including investment in IoT, Edge, 5G and intelligent automation. This is according to the latest KPMG UAE Tech Report 2022, which revealed that a majority (93%) of UAE businesses plan to invest in the metaverse, triggered by widespread technology adoption and customer demand.eanwhile, 90% plan to harness the Web3 over the next five years. An encouraging number are also set to embark on these plans within the year (metaverse – 29%) and (Web3 – 24%), which is a higher proportion than global organizations.Growth, efficiency, agility and technology modernization emerged as key enablers of digital transformation. Half of all surveyed organizations in the UAE compared with just 33% of global organizations said that digital transformation is positively impacting their finance function. Fifty percent of UAE organizations also said that their marketing, sales and service functions were benefiting the most from digital transformation, compared with 44% of global organizations.Fady Kassatly, Partner and Head of Digital and Innovation at KPMG, Lower Gulf, said: “Disruptive new technologies have proved to be a catalyst for many organizations as they look to overcome the challenges of the past two years. Unsurprisingly, the UAE has emerged as a torchbearer in enabling digital transformation, with a majority of organizations earnestly exploring investments in technology to transform their business. Our report highlights that the UAE is on the fast-track to growth, with further investments in emerging technologies playing a transformational role in driving businesses ahead in the future.”The report also found that the UAE is still maturing with respect to Data & Analytics, AI & automation compared to the rest of the world, and that despite these developments, the talent gap remains the biggest hurdle in the effective adoption of new technologies in the UAE. Organizations reported that they were operating in a more challenging environment with this talent gap and a risk-averse corporate culture. Cyber security also emerged a major concern for organizations in their cloud journey.Encouragingly, UAE tech leaders are realigning their plans to address these challenges, with clear data strategies, cyber security, and robust controls. Future cyber security investments are also expected to drive changing business models and meet evolving customer expectations.Additionally, three quarters of UAE tech leaders believed their companies were equipped with adequate leadership support and funding to advance their strategy in these areas.