Well as we know, this is in line with the federal strategy as well as the Emirates strategy to promote small business, to promote startups. We can see the Small Business Relief now offers virtually no tax for small businesses if they have revenue of less than 3 million. (By revenue, we effectively mean sales.)
So, and it’s a straight split. If you have got 2.99 million dirhams, you pay no tax. If you do 3 million in a dirham, you pay the full 9%. It’s not a sliding scale.
Does this 9% apply to all companies or its only if you are a company owned by a UAE resident. Please explain how that works.
So that’s right its only for the residents. Residents are those who live here individually, for companies that are formed here, or for companies that are here. They do business have an establishment here. So, it's tax objective for residents to promote resident business. And as I say, it's in line with the strategy for the government to promote small business, as they've mentioned, for a long time. Now that's being brought as an advantage in the tax law.
Is this law applicable for free zones? And that's significant, because there are tens, if not hundreds, of thousands of small businesses here in the UAE in free zones. We could pick dozens of other free zones. What's the situation for free zone owned companies?
True well, the free zone companies already have their special treatment. Under the tax law, the free zones are not to be taxed. So, to the extent it's qualifying income and we're still waiting for that definition, but effectively, if it’s free zone income or international income for a free zone incorporated company, then they are not to be taxed in any event. So that's why it doesn't apply. We don't need to have two of these advantages applying. They have their own advantage, which has been there.