What is the Small Business Relief under UAE corporate tax?
UAE Small Business Relief allows businesses with revenue of AED 3 million or less to elect for a 0% corporate tax rate, treating themselves as having zero taxable income. This relief applies to financial years ending on or before 31 December 2026.
Detailed Explanation
## What Is UAE Small Business Relief?
Small Business Relief (SBR) is a corporate tax concession that allows eligible businesses to elect to be treated as having no taxable income, effectively paying 0% corporate tax regardless of actual profit level. It is designed to ease the compliance burden on small UAE businesses in the initial years of the corporate tax regime.
SBR is provided under Ministerial Decision No. 73 of 2023.
## Eligibility Conditions
To elect for Small Business Relief, a business must meet all of the following:
### 1. Revenue Threshold
The business's revenue (total turnover) must not exceed AED 3 million in the relevant tax period and in all prior tax periods from 1 June 2023 onwards.
The AED 3 million threshold is based on revenue, not profit. A business with AED 2.8 million in revenue and AED 400,000 profit qualifies. A business with AED 3.2 million in revenue does not, even if it made a loss.
### 2. Not a Member of a Multinational Group
The business must not be a constituent company of a Multinational Enterprise (MNE) group that is subject to Pillar Two rules (global revenue exceeding AED 3.15 billion). Large MNE subsidiaries cannot use SBR.
### 3. Qualifying Free Zone Persons
Free zone businesses that have elected to be a Qualifying Free Zone Person (QFZP) cannot also elect for SBR. The two reliefs are mutually exclusive.
### 4. Time Limitation
SBR is available for financial years ending on or before 31 December 2026. After that date, the concession expires unless extended by the UAE Ministry of Finance.
## How to Elect for Small Business Relief
SBR is not automatic. The business must elect for it on the corporate tax return (filed via the EmaraTax portal). The election is made for each tax period separately.
When SBR is elected: - Taxable income is treated as AED 0 - No corporate tax is payable - Certain other provisions of the corporate tax law (such as loss carry-forward) may not apply or may be suspended during SBR periods - The business still needs to file a corporate tax return and register with the FTA
## Revenue Threshold Exceeded in a Future Year
If a business exceeds AED 3 million in revenue in any period, it cannot elect for SBR in that period or in any subsequent period, even if revenue falls back below AED 3 million. The exceeding of the threshold is a permanent disqualification.
This means businesses close to the AED 3 million threshold should monitor revenue carefully. Once exceeded (even slightly), SBR is permanently lost.
## Interaction with Other Reliefs and Rules
Tax losses: If a business elects for SBR in all its tax periods, it will have no accumulated tax losses to carry forward when SBR expires. When SBR ends (or is lost due to revenue exceeding the threshold), the business starts afresh with no loss pool.
Interest deduction limitations: The 30% EBITDA cap on related-party interest deductions is suspended during SBR periods.
Transfer pricing: Transfer pricing documentation requirements are generally suspended for SBR businesses, though the arm's length principle should still be observed.
## Should You Always Elect for Small Business Relief?
SBR is generally beneficial for profitable small businesses because it eliminates the current-year tax bill. However, consider the trade-offs:
- If the business has losses, SBR prevents those losses from being formally registered and carried forward
- If the business expects to exceed AED 3 million revenue soon and would benefit from losses now offsetting future profits, not electing SBR in a loss year can be more efficient in the long run
For most consistently profitable small businesses, SBR is the obvious choice until it expires at end of 2026.
Source: https://tax.gov.ae/en/taxes/corporatetax/smallbusinessrelief.aspx
Real-World Examples
Startup in its first two years
A Dubai tech startup earns AED 1.2 million in year one and AED 2.7 million in year two, with AED 350,000 profit in year two. By electing SBR in both years, it pays zero corporate tax. In year three, if revenue exceeds AED 3 million, SBR is permanently lost and the standard 0%/9% rates apply.
Freelancer conducting business through a company
A freelance consultant operates through a single-person UAE company with AED 850,000 annual revenue and AED 400,000 profit. The company elects SBR: despite profit being above the AED 375,000 standard threshold, the 9% rate does not apply and no corporate tax is due.
Business approaching the AED 3 million boundary
A trading company hits AED 3.05 million revenue in 2025, just above the threshold. SBR is unavailable for 2025 and permanently lost. On AED 500,000 profit, it pays 9% on AED 125,000 (above the AED 375,000 floor) = AED 11,250 in corporate tax for 2025.
Common Mistakes to Avoid
- Assuming Small Business Relief is automatic: it must be actively elected on each year's corporate tax return filed via EmaraTax
- Exceeding AED 3 million revenue by even a small amount and permanently losing access to SBR, which would have saved years of future tax
- Electing SBR in a loss-making year, preventing those losses from being formally carried forward to offset future taxable profits when the business becomes profitable
- Confusing the SBR revenue threshold (AED 3 million) with the standard corporate tax rate threshold (AED 375,000): they are different figures serving different purposes
Frequently Asked Questions
What is the revenue threshold for UAE Small Business Relief?
The revenue threshold is AED 3 million per tax period. The business must not have exceeded AED 3 million in any tax period from 1 June 2023 onwards. Exceeding the threshold in any one period permanently disqualifies the business from future SBR elections.
Until when is UAE Small Business Relief available?
Small Business Relief is available for financial years ending on or before 31 December 2026. After that date, the relief expires unless the UAE Ministry of Finance extends it. Businesses should plan for the transition to the standard corporate tax rates from 2027.
Does a business still need to file a corporate tax return if it elects Small Business Relief?
Yes. Filing a corporate tax return with the FTA is required for all registered businesses regardless of whether SBR is elected. The SBR election is made on the return itself. Registration with the FTA is also required before the first return is due.
Can a free zone company elect for Small Business Relief?
A Qualifying Free Zone Person (QFZP) cannot elect for SBR as the two reliefs are mutually exclusive. Free zone companies that have not elected QFZP status can potentially use SBR if they meet the other eligibility conditions.
What happens to tax losses if I elect for Small Business Relief?
If SBR is elected, taxable income is treated as zero, meaning no tax losses arise in those periods. When SBR ends (by expiry or by revenue exceeding the threshold), the business has no accumulated loss pool to carry forward. This is a potential disadvantage of SBR in loss-making years.
Practical Tips
- Set a revenue monitoring alert at AED 2.8 million so you can plan for the transition to standard corporate tax rates before crossing AED 3 million and permanently losing SBR
- If your business is making losses, consider whether not electing SBR and formally recording those losses could be more valuable than the current year's tax saving
- Mark 31 December 2026 in your planning calendar as the SBR expiry date and model your corporate tax position from 2027 onwards using the standard 0%/9% rates
- Use accounting software to track revenue accurately month by month: the SBR threshold is based on revenue not profit, so a high-revenue low-margin business can lose SBR while barely profitable
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