Small Business Relief and UAE Corporate Tax

Small Business Relief lets a UAE resident business whose revenue is AED 3,000,000 or less, in the current tax period and in every earlier one, elect in its corporate tax return to be treated as having no taxable income. The result is no corporate tax to pay for that period. On 7 August 2026 the Ministry of Finance announced Ministerial Decision No. 131, which extends the relief to tax periods ending on or before 31 December 2029. What the relief does not remove is registration, the annual return, or the records that prove your revenue stayed under the line.

Key takeaways

• The test is gross revenue, not profit: a trading company with AED 2.9 million of sales and thin margins qualifies, a consultancy with AED 3.1 million and high margins does not.
• Crossing AED 3,000,000 once ends eligibility for good, even if revenue falls back later (Article 2(3) of Ministerial Decision No. 73 of 2023).
• Qualifying Free Zone Persons and members of multinational groups with consolidated revenue of more than AED 3.15 billion cannot elect it.
• Electing gives up the use of tax losses for that period, and a loss made in an elected year is never declared or carried forward.
• The election is made in each return. A return filed without it cannot be amended later to claim it, according to the FTA’s Small Business Relief guide.
• Returns are due nine months after the tax period ends, so a December 2025 year end had a deadline of 30 September 2026.

Who can elect Small Business Relief

The relief is open to Resident Persons for corporate tax. For companies that means any juridical person incorporated in the UAE, such as a Dubai mainland LLC or a free zone company that is not claiming the 0% qualifying rate. A foreign company is resident only if it is effectively managed and controlled from the UAE.

Individuals come in through a different door. Under Cabinet Decision No. 49 of 2023, a natural person is only subject to corporate tax once turnover from business activity passes AED 1,000,000 in a calendar year. Salary, personal investment income and private real estate income are excluded from that count. So a freelance designer billing AED 1.4 million is inside the regime and can then elect Small Business Relief, because AED 1.4 million is under the AED 3 million revenue ceiling.

Three groups are shut out regardless of size:

• Qualifying Free Zone Persons, because they already take 0% on qualifying income. A free zone company that elects to be taxed under Article 19 of the Corporate Tax Law becomes an ordinary Free Zone Person and can then elect the relief if it qualifies.
• Constituent companies of a multinational group with consolidated revenue of more than AED 3.15 billion, the country-by-country reporting threshold.
• Non-resident persons, including their UAE permanent establishments, unless the home country has a tax treaty in force with the UAE containing a non-discrimination article for permanent establishments.

The free zone point catches many owners out. The relief and the free zone 0% rate are alternatives, not a stack. Our guide to corporate tax registration for free zone companies covers the qualifying conditions; if your FZE or FZCO bills mostly mainland clients and would fail them, the relief may be the better route, and that comparison is worth running with an accountant before the return is filed.

How the AED 3 million revenue test is counted

Revenue here is “the gross amount of income derived during a Tax Period”, measured under the accounting standard the business uses. Ministerial Decision No. 114 of 2023 lets a business with revenue up to AED 3,000,000 prepare its financial statements on a cash basis, so a small business can measure revenue on cash received instead of IFRS. The FTA can challenge that choice if the outcome is unreasonable.

The trap is that “gross income” is wider than sales. The FTA guide’s own examples show how:

Example 8 in the guide is the one to remember. A shop owner with AED 1,850,000 of normal revenue sells the shop premises for AED 1,200,000 in the same year. Revenue becomes AED 4,150,000 for that period, eligibility ends, and it does not come back the following year. The FTA states that a one-off event is not relevant.

In practice, one issue we often see is an owner planning the sale of a van, a fit-out or a second branch without checking which tax period it lands in. If the relief matters to you, time disposals and group dividends against the threshold before they happen, not after.

What electing removes, and what it costs

A business that elects is treated as having no taxable income, so it skips the taxable income calculation entirely. That sounds like pure gain. The FTA’s comparison in Table 1 of its guide shows the price.

The line that matters most for young companies is losses. Example 11 of the guide describes a company with AED 2,500,000 of revenue and AED 3,500,000 of costs in its first year. If it elects, the AED 1,000,000 loss is never declared and cannot be carried forward. If it does not elect, it files a full return, pays nothing for that year anyway because it made a loss, and keeps the loss to offset against future profit.

From an advisory perspective, that gives a rough decision rule. A profitable small business under the ceiling should normally elect. A business that is loss-making now and expects to grow past AED 3 million within a few years should compare the one-year saving in paperwork with the value of the loss it would forfeit. The loss rules in the Corporate Tax Law set conditions on using losses later, so ask your accountant to confirm the loss would actually be usable before you give up the election.

Groups have a second trade-off. Example 15 shows two sister companies where one sells a vehicle to the other at a gain. If the buyer elects the relief, the seller cannot use qualifying group relief on the transfer and pays tax on the AED 100,000 gain. One company’s election can change another company’s tax bill.

What the relief is worth in dirhams

Without the relief, the first AED 375,000 of taxable income is taxed at 0% and the rest at 9%. The saving therefore depends on profit, not revenue. The FTA guide works through three businesses that each have AED 2,800,000 of revenue:

A business whose profit is below AED 375,000 would pay no tax either way. For that business, the relief is worth the simpler return and the lighter bookkeeping, not a tax saving. That is still worth having, but it changes how much effort a borderline case deserves.

Making the election and meeting the filing deadline

The sequence is fixed. Register on EmaraTax, obtain a tax registration number, then elect in the return for each tax period. There is no one-time application that carries forward. The election also cannot be claimed later: the FTA guide says that once a return is submitted without it, there is no possibility of claiming the benefit at a later stage.

Returns are due within nine months of the end of the tax period, and the FTA has been explicit that this includes businesses eligible for the relief. In a release dated 26 September 2026 it named 30 September 2026 as the filing and payment deadline for tax periods ending 31 December 2025. A company with a June year end files by the end of March.

New companies should check their first tax period, which follows the first financial year and can be longer or shorter than twelve months. A Dubai mainland company licensed in August does not necessarily file its first return the following August.

The records you still have to keep

Because the relief depends on revenue, the FTA needs to be able to verify revenue for every period back to your first. The guide gives examples rather than a fixed list: bank statements, sales ledgers, invoices or till rolls, order records and delivery notes, and business correspondence. An FTA release of 2 September 2026 adds a record of transactions for the period, an asset register showing purchases and disposals, a record of liabilities, and a record of shares or ownership interests held at the end of the period.

Records must be kept for seven years after the end of the tax period they relate to. Scanned copies are acceptable if they are readable and available on request. On a cash basis, an invoice raised in December 2025 but paid in January 2026 belongs to the 2026 period, so its seven years run from the end of 2026.

The weak point we see in small businesses is not missing records, it is records scattered across WhatsApp, email and a personal bank account. A founder who takes client payments into a personal account makes the revenue figure hard to prove, which is the one figure the relief rests on. Separate accounts and one invoicing system fix most of it.

The relief also changes nothing about VAT. A VAT-registered business keeps filing VAT returns as before; only the corporate tax side is simplified.

Splitting a business to stay under the ceiling

Article 6 of Ministerial Decision No. 73 of 2023 lets the FTA deny the relief where a business has been artificially separated to keep each part below AED 3 million. If it does, the unpaid tax becomes due and penalties may apply. The guide names three patterns:

• Functional separation, such as moving a hotel’s in-house restaurant into a new company with the same staff, manager and customers.
• Geographical separation, such as one owner running laundrettes in Downtown Dubai, Business Bay and Jumeirah through three companies that buy supplies together.
• Temporal separation, such as a consultant who closes one company each time sales near the threshold and opens another serving the same clients.

The FTA looks at two things: whether there was a genuine commercial reason for the split, and whether substantially the same business continues. It weighs financial links (one entity funding another), economic links (shared customers) and organisational links (shared premises, staff, managers and marketing). Owning more than one company is not a problem in itself. The guide accepts a franchise between an Abu Dhabi cafe and a separately owned Dubai cafe as a valid commercial arrangement.

For anyone choosing a legal structure now, our comparison of sole establishment, FZE and LLC is the place to start. Pick the structure for liability and licensing reasons, and let the tax result follow. A structure chosen only to keep each entity under AED 3 million is what the rule targets.

Planning around the 2029 end date

The FTA’s Small Business Relief guide, first published in August 2023 and still the version listed on tax.gov.ae when we checked on 29 September 2026, refers to tax periods ending on or before 31 December 2026. Ministerial Decision No. 131 has since moved that to 31 December 2029 while keeping the AED 3,000,000 threshold. Read older guidance with that change in mind.

Two practical points follow. First, the revenue test looks back over every period since your first one, so the extension does not reopen the relief for a business that crossed the line in 2024. Second, nothing has been announced about what happens after 2029. A business planning a five-year budget should model the years after 2029 at the normal 0% and 9% rates rather than assume another extension.

If you are unsure whether to elect for a coming return, or your company is not yet registered, our corporate tax and VAT registration service handles the registration, writes down your financial year and filing dates, and sets up records a return can be built from.

Figures and rules are indicative and were checked on 1 October 2026 against the FTA’s Corporate Tax Guide on Small Business Relief (CTGSBR1, August 2023), the Ministry of Finance announcement of Ministerial Decision No. 131 dated 7 August 2026, and the FTA’s corporate tax filing and payment page. Tax rules change; this is general information rather than tax advice on your own position. Cover photo: Deira Dubai Creek, via Wikimedia Commons (CC0).