Small Business Relief is the most valuable thing in the UAE corporate tax regime for a company turning over less than AED 3 million — and the one most often lost through a paperwork mistake. It was also extended last month, which most published guidance has not caught up with.
The extension almost nobody has updated for
Until recently, Small Business Relief was set to end with tax periods finishing on or before 31 December 2026. That changed.
Ministerial Decision No. 131 of 2026, issued on 29 July 2026, amended the original rule so that the threshold “shall continue to apply to subsequent Tax Periods that end on or before 31 December 2029.” The Ministry of Finance announced it on 7 August 2026. The decision changed only the end date — every other condition is untouched.
One trap worth flagging: the Federal Tax Authority’s own Small Business Relief guide still says 31 December 2026 throughout. It was published in August 2023 and has not been reissued. Use it for mechanics; do not use it for the end date.
What the relief actually does
If you elect for it, you are treated as having no Taxable Income for that period. You still file — a simplified return — and you may use cash-basis financial statements.
What it saves is straightforward. UAE corporate tax is 0% on taxable income up to AED 375,000 and 9% above it, set by Cabinet Decision, applying to financial years starting on or after 1 June 2023. On the FTA’s own worked example, a business with AED 2.8 million of revenue and AED 800,000 of profit would otherwise owe AED 38,250. With the election, it owes nothing.
The threshold — and the trapdoor inside it
The threshold is AED 3,000,000 of revenue for each tax period. Two points about it are routinely got wrong.
First, it is a revenue test, not a profit test, determined under the accounting standards accepted in the UAE. A business with AED 4 million of revenue and AED 100,000 of profit does not qualify.
Second — and this is the expensive one — it is a cliff, and breaching it is permanent. The rule states that a taxable person “shall not be able to elect to apply the Small Business Relief if their Revenue in any relevant or previous Tax Period has exceeded the threshold.” Cross AED 3 million once, in any period, and you are out for good. You do not come back when revenue falls again.
Who cannot claim it
| Excluded | Detail |
|---|---|
| Non-Resident Persons | Only a Resident Person may elect, regardless of revenue |
| Multinational group members | A constituent company of a group with consolidated revenue of at least AED 3.15 billion that must file a Country-by-Country Report |
| Qualifying Free Zone Persons | Barred while they hold that status |
The free zone point deserves care, because most summaries state it too broadly. Only a Qualifying Free Zone Person is excluded. The FTA is explicit: “Free Zone Persons that are not Qualifying Free Zone Persons are eligible for Small Business Relief.” And a QFZP that elects to be taxed under the ordinary rules becomes an ordinary free zone person, and can then claim the relief. Our guide to the free zone corporate tax rules covers what qualifying status involves.
Sole traders are the classic candidate. A natural person is only within corporate tax at all above AED 1,000,000 of turnover in a calendar year, and wages, personal investment income and real estate investment income are excluded entirely from that count. That leaves a clear band — between AED 1 million and AED 3 million — where the relief does the most work.
The election, which is where people lose it
This is the section to read twice. The relief is not automatic.
You must register for corporate tax and obtain a tax registration number, then make an election in the tax return — and repeat it every single tax period. In the FTA’s words: “This election must be made for each Tax Period that a Tax Return is filed in order for the relief to apply for that Tax Period.”
And it cannot be repaired afterwards: “Once the Tax Return for the relevant Tax Period has been submitted with no election to benefit from the Small Business Relief, there would be no possibility to claim this benefit at a later stage.”
A qualifying business that files without ticking the box pays the tax. There is no correction route.
What you give up
Electing is not free of consequence, and for a loss-making year it can be the wrong choice.
Tax losses arising in a Small Business Relief period cannot be carried forward at all. The same applies to net interest expenditure. Losses from earlier non-relief periods survive and can still be used in later non-relief periods — but anything generated while you are inside the relief is simply gone.
Exempt income, other reliefs and deductions are also switched off for the period. Transfer pricing documentation requirements fall away, but the FTA can still enquire and the arm’s length principle still binds you.
The practical point: if you had a genuinely bad year and expect strong profits next year, electing may cost more than it saves. Model it rather than assuming.
Do not split the business
The obvious scheme is anticipated. Splitting a business to stay under AED 3 million is treated as an arrangement to obtain a corporate tax advantage under the general anti-abuse rule. The FTA weighs whether there was a “valid commercial purpose” and whether the persons carry on “substantially the same Business”, looking at financial, economic and organisational links.
Registration and records
Registration deadlines were set by month of licence issuance, running from 31 May 2024 for January and February licences through to 31 December 2024 for December ones. Businesses incorporated on or after 1 March 2024 have three months from incorporation; resident natural persons must register by 31 March of the following year. Late registration carries an administrative penalty of AED 10,000.
Records must be kept for seven years after the end of the tax period they relate to — so a period ending 31 December 2026 means keeping records until 31 December 2033.
For the surrounding obligations see our guides to the 9% corporate tax rate, to VAT registration, and — if you are setting up now — to the Dubai Instant Licence and business setup in the UAE.
This article is general information, not tax advice. Primary sources: Ministerial Decision No. 131 of 2026 (PDF), Ministerial Decision No. 73 of 2023 (PDF), the FTA Small Business Relief Guide (PDF) and the Ministry of Finance announcement of the extension.
