Exploring the Difference Between Internal Audit and External Audit
18/07/2025
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Dubai has emerged as a key player in the Middle East’s economic development, attracting foreign companies and multinational corporations across sectors like technology, logistics, consulting, and finance. With advanced infrastructure, a strong digital ecosystem, and supportive government policies, it serves as a launchpad for global expansion—often becoming the regional headquarters for many global giants like Google, especially in hubs such as Dubai Internet City.
However, with the introduction of the UAE Corporate Tax Law in 2023, even companies with foreign ownership now face new compliance obligations. For smaller enterprises and startups, this shift could add pressure on business operations, especially those in early growth stages.
To address this, the UAE introduced a vital policy: Small Business Relief. Targeted at startups and qualifying companies—including foreign-owned entities—this measure offers generous tax benefits, making it essential for foreign investors to understand its scope and conditions.
Small Business Relief is a key provision introduced under Federal Decree-Law No. 47 of 2022 and forms a critical part of the UAE’s evolving corporate tax framework. Targeted at small and medium-sized enterprises (SMEs), this relief applies to tax periods beginning on or after 1 June 2023. It enables qualifying businesses to benefit from a 0% corporate tax rate on their taxable income, as long as their consolidated group revenue remains within the threshold set by the Federal Tax Authority (FTA).
This initiative directly supports the UAE’s ambition to position itself as a global hub for advanced technologies, innovation, and digital transformation. By reducing the initial tax burden, the relief empowers startups and emerging companies—especially in high-growth sectors such as cloud computing, data analytics, artificial intelligence, logistics, and healthcare—to reinvest early profits into business development.
The policy is also designed to attract multinational companies looking to establish regional operations, particularly in Dubai, which offers an unmatched ecosystem of tax benefits, modern infrastructure, and regulatory clarity within the Middle East. Moreover, parent companies that operate multiple small subsidiaries may find strategic value in this relief if each unit independently meets the FTA's eligibility criteria.
Ultimately, Small Business Relief serves as both a compliance incentive and a growth catalyst, allowing promising businesses to scale sustainably and contribute to the UAE’s long-term economic diversification goals.
Yes, foreign companies operating in Dubai or anywhere in the UAE are eligible for Small Business Relief—provided they meet clearly defined legal and operational criteria established by the UAE government, specifically the Ministry of Finance and the Federal Tax Authority (FTA). This relief plays a critical role in strengthening the UAE’s growing economy and making it more attractive for global investors, especially from tech and service hubs such as the USA, UK, India, and California.
To qualify, a foreign company must be considered a resident person under UAE corporate tax law. This includes:
Entities incorporated within the UAE mainland or in any recognized Free Zone jurisdiction;
Foreign branches, subsidiaries, or representative offices that are effectively managed and controlled from within the UAE, and maintain a physical presence such as an office, warehouse, or operational base locally.
For instance, a Google subsidiary with a regional headquarters in Dubai may qualify if it fulfills the FTA’s criteria and isn't part of an ineligible group or sector.
The company’s total gross revenue must not exceed AED 3 million in any relevant tax period. This threshold ensures the policy remains focused on startups and small businesses, including foreign firms newly entering the Middle East market. It provides breathing room for companies expanding cautiously while navigating the acquisition and service of clients, building a strong client base, regional compliance, and operational setup.
Foreign entities must not be part of a Multinational Enterprise (MNE) Group with consolidated global revenue exceeding AED 3.15 billion. The definition follows OECD guidelines and targets support to businesses without the backing of large parent companies or global funding lines. For example, while a small UK-based tourism tech startup expanding into the UAE could qualify, a multinational insurance group would not.
To maintain fiscal integrity and avoid undue benefits to high-capacity sectors, the relief excludes businesses engaged in:
Banking
Insurance
Oil and gas
Certain regulated financial services
These sectors already have deep capital reserves and are closely monitored by UAE regulators. This eligibility framework ensures that Small Business Relief reaches those who need it most: lean startups, early-stage tech companies, and agile foreign-owned businesses exploring the UAE economy. Whether you're expanding from California, launching a branch from India, or scaling your services from the UK, the UAE offers a structured yet supportive path—especially for those serving industries like digital marketing, tourism, or cloud-based services.
By helping responsible businesses grow, the UAE continues positioning itself as the gateway for foreign investment and innovation in the Middle East.
Selecting the right location for your business operations in the UAE is a critical decision that can shape your company’s success in the region. The UAE boasts a variety of business hubs, each designed to cater to specific sectors and the unique needs of foreign companies and multinational companies. For technology-driven businesses, Dubai Internet City stands out as a premier destination. This hub is renowned for its vibrant ecosystem, offering seamless access to advanced technologies, cloud computing infrastructure, and cutting-edge data analytics services.
Establishing your company in Dubai Internet City not only places you at the heart of the Middle East’s technology sector but also connects you with a network of innovative firms and global giants. The city’s strategic location ensures proximity to key markets, making it easier for companies to expand their business activities and establish a strong presence in Dubai and beyond. Whether your focus is on technology, telecommunications, or digital services, Dubai offers the infrastructure, talent pool, and regulatory support needed to operate efficiently and scale your business.
Other business hubs across the UAE, such as those in Abu Dhabi and emerging tech parks, also provide tailored environments for companies in sectors like finance, healthcare, and logistics. When choosing your location, consider factors such as access to skilled professionals, the availability of modern office space, and the ease of integrating with local and regional markets. By aligning your business operations with the right hub, your company can leverage the UAE’s world-class infrastructure and position itself as a key player in the region’s dynamic economy.
The Small Business Relief scheme provides substantial advantages, particularly for foreign-owned firms entering or scaling within the UAE:
Companies with revenue under AED 3 million pay no corporate tax—an incentive unmatched in many other jurisdictions.
Qualified firms can file lighter corporate tax returns, minimizing the liability of complex disclosures.
Without advance payments or pre-emptive taxation, companies retain more profits to reinvest in infrastructure, office expansion, or business activities like R&D, hiring, and product development.
Early-stage firms, particularly in sectors like technology, consulting, and digital media, can focus on core operations instead of backend compliance.
Relief is available up to 31 December 2026, offering predictability for budgeting, tax modeling, and investment planning.
To fully benefit from the relief, foreign businesses must carefully manage compliance. These criteria must be strictly followed:
→ Revenue Threshold Adherence: Companies must consistently keep revenue below the AED 3 million mark. All income, regardless of whether taxable or exempt, counts toward this figure.
→ FTA Registration: Registration through EmaraTax, the FTA’s digital tax portal, is mandatory—even if no tax is payable.
→ Legal Classification: Only resident entities qualify. A branch or representative office of a foreign parent company may not qualify unless the UAE entity is properly registered and managed locally.
→ Audit-Ready Financial Records: All businesses must maintain compliant bookkeeping, including financial reporting, balance sheets, and invoices—even during the relief period.
→ Non-Affiliation With MNEs: If part of a multinational group, the business must prove that total consolidated revenue remains below the stated global threshold.
Foreign firms often fall into traps due to misinterpretation, especially if relying on informal guidance or outdated assumptions. Risks include:
Believing that a UAE license automatically qualifies a company for relief.
Overlooking indirect ownership connections that classify the firm under an MNE group.
Failing to maintain audit-ready records, especially regarding taxable income, expenses, and related-party transactions.
Not registering on EmaraTax or failing to declare relief during return submission.
Operating under multiple trade names or licenses to stay “under the threshold,” which may be flagged as avoidance by the FTA.
Violations can lead to penalties, fines, backdated assessments, and even disqualification from future tax benefits.
Understanding how Small Business Relief differs from other fiscal incentives is essential for foreign investors, SMEs, and even multinational companies planning to enter the UAE market. While multiple support mechanisms exist, they serve different purposes within the broader economic framework established by the UAE government to stimulate growth and diversification.
Free Zones across Dubai and the wider UAE offer a 0% corporate tax rate on qualifying income, typically for companies with minimal interaction with the mainland economy. These zones play a pivotal role in attracting international firms and boosting the non-oil economy by offering streamlined services, infrastructure, and full foreign ownership. However, Small Business Relief stands apart—it applies across the UAE, including mainland businesses, provided they meet the revenue and activity criteria during the relevant tax period.
These are designed to nurture early-stage businesses by lowering the cost of entry. Incentives may include reduced fees on trade licenses, visas, and coworking services, especially in innovation-focused Free Zones or tech hubs. However, these do not reduce your corporate tax obligation. Even if your setup costs are subsidized, you may still be required to pay corporate tax—unless you qualify separately for Small Business Relief.
If your taxable turnover falls below AED 375,000, you are not required to register for VAT. However, this government threshold is distinct from corporate tax obligations. A business may be VAT-exempt yet still need to register for corporate tax and can still claim Small Business Relief if annual revenue remains under AED 3 million for the applicable tax period.
Being eligible for Small Business Relief under the UAE Corporate Tax Law doesn’t mean the benefit applies automatically. Companies must explicitly declare their intention to claim the relief in each tax return for the relevant tax period. Missing this step may result in unintended tax liability.
Some businesses attempt to split operations across different trade licenses to keep reported income under AED 3 million. However, the Federal Tax Authority (FTA) may treat such setups as connected persons, especially if the companies share office space, ownership, or management. In such cases, the FTA aggregates revenue across all entities, disqualifying the group from relief based on consolidated group revenue.
Not all Free Zone businesses are eligible. Those that generate non-qualifying income or lack economic substance in the UAE—such as no real operational activity or no physical office space—may not meet the criteria. The assumption that every Free Zone setup benefits from 0% tax can lead to costly errors.
Multinational companies and foreign SMEs alike often blur the lines between personal and business finances. However, using shared accounts can make your records non-compliant during an FTA audit. For Small Business Relief and corporate tax purposes, maintaining separate, well-documented financial records is essential.
Meeting the revenue threshold once doesn’t guarantee continued eligibility. Businesses that experience growth over time—especially those expanding into Dubai offers or new markets—must consistently monitor turnover throughout each tax period. A company that qualified one year could exceed the threshold in the next, making it ineligible for relief.
At Young & Right Accounting and Tax Consultancy, we offer end-to-end support to ensure your foreign business is eligible for and compliant with Small Business Relief throughout your tax journey.
We review your company’s ownership, structure, and business activities against current FTA eligibility criteria.
Where required, we restructure your entity to align with UAE residency, management, and licensing laws.
We manage your entire EmaraTax setup, prepare accurate returns, and respond to any FTA queries on your behalf.
We maintain reliable records across all departments—ensuring your business is audit-ready and eligible throughout the tax period.
We track your revenue and income streams to keep you compliant and plan your transition once you surpass the AED 3 million threshold.
Our team helps foreign-owned companies in Dubai and Abu Dhabi establish a strong presence with tax peace of mind—so you can expand, scale, and focus on business success.
Small Business Relief is more than a temporary exemption—it’s a strategic tax benefit for eligible foreign companies to launch and grow confidently in the UAE. From representative offices to full subsidiaries, businesses that maintain proper management, documentation, and compliance can fully leverage this opportunity.
With Dubai and the broader UAE continuing to attract international interest and investments, this relief policy supports not just tax optimization—but long-term economic development.
Ensure your foreign business in Dubai qualifies for valuable tax savings. Let us help you navigate the process and stay compliant.
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