Small Business Relief: Compliance Obligations

Small Business Relief (SBR) offers a valuable opportunity for eligible businesses to streamline their tax obligations and reduce administrative burdens. However, to fully leverage this relief, businesses must understand the specific compliance obligations, record-keeping requirements, and administrative processes. Below is a detailed guide to assist small businesses in maximizing the benefits of this relief. 

Self-Assessment, Registration, and Election Requirements

To benefit from Small Business Relief, an eligible Taxable Person must first be registered for Corporate Tax. Once registrated, they must elect for the relief by filing a Tax Return. This election is not a one-time process but must be made for each Taxable Period. 

Despite electing for Small Business Relief, the business remains a Taxable Person under Corporate Tax Law. This status means the business must continue to fulfill all Corporate Tax compliance obligations, including: 

• Registering for Corporate Tax 

• Filing a simplified Tax Return 

• Retaining all relevant documents and records to support their Corporate Tax filings 

Filing Tax Returns 

Businesses electing for SBR are still required to file Tax Returns, but the process is simplified. Key benefits include: 

• Reduced Information Requirements: The amount of information required is less extensive. 

• Time Savings: The simplified return reduces the time needed for preparation. 

Record-Keeping to Demonstrate Revenue

Proper record-keeping is essential to demonstrate compliance with the Small Business Relief requirements. The Corporate Tax Law mandates that businesses maintain records and documentation to: 

• Support Information in Tax Returns: Records should substantiate the information provided in Tax Returns or other documents submitted to the FTA. 

• Demonstrate Taxable Income: The records should clearly demonstrate that the business’s revenue did not exceed AED 3,000,000 in any Tax Period. 

While there is no fixed list of required documents, the following examples are crucial: 

• Bank Statements 

• Sales Ledgers 

• Invoices and Records of Daily Earnings (e.g., till rolls) 

• Order Records and Delivery Notes 

• Other Relevant Business Correspondence 

Records can be maintained in various formats, including electronic formats like scanned copies of paper receipts.  

Record-Keeping Period

Businesses are required to retain their records for seven years following the end of the Tax Period to which they relate. It’s important to note: 

• Seven-Year Rule: Businesses must retain these records for seven years after the end of the relevant Tax Period.  

• Cash Basis Accounting: For those using cash basis accounting, invoices might be raised in one Tax Period but paid in another. The seven-year retention period starts from the end of the Tax Period in which payment was made, not the date of the invoice. 

Conclusion 

Small Business Relief simplifies tax obligations and reduces administrative workload. However, they require careful adherence to compliance and record keeping practices. By staying organized, businesses can make the most of the relief and remain prepared for FTA inquiries.