Small business relief: who qualifies for UAE corporate tax relief and how to claim it

Small business relief lets a resident business with revenue of AED 3 million or less, in the current tax period and every earlier one, be treated as having no taxable income, so it pays no corporate tax. Ministerial Decision No. 131 of 2026 extended it to tax periods ending on or before 31 December 2029. The business must still register and elect the relief in each tax return.

Key takeaways

• A resident business can elect the relief for a tax period when its revenue in that period and every earlier one is AED 3 million or less.
• Ministerial Decision No. 131 of 2026 extended the relief to tax periods ending on or before 31 December 2029, from 31 December 2026.
• Qualifying free zone persons and members of multinational groups with consolidated revenue of AED 3.15 billion or more cannot use it.
• The relief must be elected in the tax return for each period, so the business still registers and files a simplified return.
• Once revenue exceeds AED 3 million in any tax period, the relief is gone for that period and every later one.

On this page 10 sections

What small business relief is

Small business relief is an election, not an automatic exemption. Under Article 21 of the Corporate Tax Law, a resident taxable person that passes the revenue test and is not excluded can choose to be treated as having derived no taxable income for a tax period. With no taxable income there is nothing to tax, so no corporate tax is due for that period, however profitable the business was.

Small business relief revenue limit

AED 3,000,000 revenue

A resident Taxable Person can elect Small Business Relief, and be treated as having no Taxable Income, for a Tax Period in which its Revenue, and its Revenue in every previous Tax Period, does not exceed AED 3 million; once Revenue exceeds AED 3 million in any Tax Period, the relief is no longer available.

The relief is not the same as the 0% band. The band applies once per taxable person and covers the first AED 375,000 of taxable income, which is profit after the tax adjustments; the relief looks only at revenue and, when elected, removes the whole tax bill for the period. How the two bands work is set out in the 0% and 9% corporate tax rates.

The extension to 2029

Small business relief has been extended by three years; the decision that extended it changes nothing else.

Last tax periods covered

Tax Periods ending on or before 31 December 2029

Small Business Relief applies to Tax Periods starting on or after 1 June 2023 and to later Tax Periods that end on or before 31 December 2029, extended from the original end date of 31 December 2026.

The Minister of State for Financial Affairs issued the decision on 29 July 2026 and the Ministry of Finance announced it on 7 August 2026; it takes effect the day after its publication. It replaces a single clause of Ministerial Decision No. 73 of 2023, Article 2(2), which sets the tax periods the AED 3 million threshold applies to. The exclusions and the way the relief is claimed stay as they were.

The FTA’s guide to the relief (CTGSBR1, August 2023), the PDF many people look for, predates the decision and still gives 31 December 2026 as the end date. Because the decision changes only the end date, the guide’s explanations of the revenue test, the exclusions and record keeping are not affected by it.

What counts is the date a tax period ends, not the date it starts:

Who qualifies

A business qualifies when it is a resident person for corporate tax and its revenue has not exceeded AED 3 million in the current tax period or in any earlier one. The FTA’s guide says there are no other conditions, apart from the two exclusions (qualifying free zone persons and members of large multinational groups) set out in the next section.

Resident persons only

Under Article 11(3) of the Corporate Tax Law, resident persons are companies and other juridical persons incorporated, established or recognised in the UAE, including free zone persons; foreign companies effectively managed and controlled in the UAE; individuals who conduct a business in the UAE; and any other person the Cabinet names in a decision. An individual is in scope only when business turnover exceeds AED 1 million in a calendar year, and wages, personal investment income and real estate investment income do not count towards it (FTA guide, section 4.3.1).

Non-residents cannot elect, even for income from a UAE office. The FTA’s guide notes one exception: the UAE permanent establishment of a person from a country that has a double tax agreement in force with the UAE, with a non-discrimination clause for permanent establishments, can qualify if it meets the other conditions.

The revenue test, period by period

The test covers the business’s whole corporate tax history. Revenue must be within the limit in the period being claimed and in every earlier tax period, the first of which started on or after 1 June 2023. One period above AED 3 million ends the relief for good, even when a one-off sale caused it and revenue later falls back.

For a tax group, the limit applies to the group as one taxable person. In an example in the FTA’s guide, three members with revenue of AED 1,300,000, AED 900,000 and AED 1,000,000 are each under the limit, but the group’s AED 3,200,000 is not, so the group cannot elect.

What counts as revenue

Revenue is gross income, not profit. The law defines it as the gross amount of income derived during a tax period, so costs are never deducted. The FTA’s guide gives these examples:

Revenue can be measured under IFRS, IFRS for SMEs or, for a business whose revenue does not exceed AED 3,000,000, the cash basis of accounting. The FTA’s guide adds that the authority can challenge the choice if it gives an unreasonable result.

Who cannot use it

Two groups are excluded whatever their revenue: qualifying free zone persons and members of large multinational groups. The relief is also denied where a business is split artificially to keep each part under the limit, and non-residents are outside it as well.

Excluded from the relief

QFZPs and MNE Group members (group revenue AED 3.15 billion or more) excluded

A Resident Person that elects Small Business Relief must not be a Qualifying Free Zone Person or a Constituent Company of a Multinational Enterprises Group as defined in Cabinet Resolution No. 44 of 2020: a group with companies tax resident in different jurisdictions (or one company with a permanent establishment abroad) whose total consolidated group revenue in the fiscal year before the reporting year is AED 3.15 billion or more.

A qualifying free zone person already pays 0% on its qualifying income. A free zone company that is not a qualifying free zone person can elect the relief if its revenue stays within the limit, and so can a qualifying free zone person that has elected under Article 19 to be taxed under the standard rules for that period. The free zone conditions are covered in corporate tax in free zones.

The multinational group is the one defined for country-by-country reporting in Cabinet Resolution No. 44 of 2020: companies tax resident in more than one country (or one company with a permanent establishment abroad) whose total consolidated revenue in the previous financial year was AED 3.15 billion or more. A UAE company in such a group is excluded even when its own revenue is small, because the test is membership of the group, not the size of the company.

Splitting a business to stay under the limit

Relief withdrawn; unpaid tax and penalties due

Small Business Relief is not available where a person artificially separates its Business into more than one entity to keep each entity's Revenue under the threshold; where the FTA establishes artificial separation, the person must pay the unpaid Corporate Tax and any penalties.

Under Article 6 of Ministerial Decision No. 73 of 2023, where the FTA establishes that a business has been split artificially, the revenue of the whole business exceeds AED 3 million in a tax period and the parts have elected the relief, the split is treated as an arrangement to obtain a corporate tax advantage under the general anti-abuse rule in Article 50 of the Corporate Tax Law. The FTA considers whether the split had a valid commercial purpose and whether the parts carry on substantially the same business, looking at their financial, economic and organisational links. How penalties are charged is explained in corporate tax penalties.

How to claim it

There is no separate application: the relief is claimed by making an election in the corporate tax return, once for every tax period.

How the relief is claimed

Elected in each Tax Return

Small Business Relief is optional: an eligible person must first register for Corporate Tax and then elect the relief in its Tax Return for each Tax Period; once a return is submitted without the election, the relief cannot be claimed later for that period, and a person that elects files a simplified Tax Return.

1. Register. The business registers for corporate tax with the Federal Tax Authority and receives a tax registration number (TRN). The steps are in how to register for corporate tax.
2. Keep revenue records for every tax period, since eligibility depends on all of them.
3. Elect in the return. The return is filed on EmaraTax, the FTA’s online portal. Its small business relief section shows the revenue already entered and asks whether the taxable person wants to make the election; the question does not appear when earlier answers show the business is not eligible.
4. File on time. The simplified return is due within nine months after the end of the tax period. Filing the corporate tax return covers the form, and the return due date calculator gives the date for a given period.

What you give up by electing

Because Article 21(1) treats the business as having no taxable income, Article 21(2) switches off the parts of the law used to work it out:

Tax losses from earlier periods without the relief are not forfeited: Article 4(2) of Ministerial Decision No. 73 of 2023 carries them forward to later periods in which the relief is not elected. In such a period the usual cap limits how much taxable income they can absorb. Disallowed net interest expenditure from earlier periods also carries forward to periods without the relief (Article 5(2)), but the FTA’s guide says periods with the relief still count towards the time limit on carrying it forward.

Cap on using carried-forward losses

75%

Tax Losses carried forward can reduce the Taxable Income of a later Tax Period by no more than 75% of that period's Taxable Income before loss relief; losses from before Corporate Tax started, or before the person became a Taxable Person, cannot be used.

A period with the relief produces no tax loss of its own, even if the business made an accounting loss.

Worked example

The relief removes the tax that the 0% and 9% bands would otherwise produce, so its value grows with profit while the revenue test stays the same.

Upper limit of the 0% band

AED 375,000

The 0% Corporate Tax band covers Taxable Income up to and including AED 375,000 in a Tax Period; Taxable Income above AED 375,000 is taxed at 9%. The band applies once per Taxable Person, regardless of how many businesses it carries on.

Worked example

Revenue of AED 2,800,000 and taxable income of AED 1,000,000

The figures are illustrations; the FTA’s small business relief guide uses the same revenue and profit in one of its tables. The business is a resident company that is not a qualifying free zone person or part of a large multinational group. Its tax period ends on 31 December 2027, and its revenue has never exceeded AED 3,000,000.

1. Revenue test: AED 2,800,000 is not more than AED 3,000,000, and the period ends before 31 December 2029, so the relief can be elected.
2. Without the relief, the first AED 375,000 of taxable income is taxed at 0%: tax AED 0.
3. The rest is AED 1,000,000 minus AED 375,000, which is AED 625,000.
4. Tax on that part is AED 625,000 × 9% = AED 56,250.
5. With the relief elected in the return, the business is treated as having no taxable income: tax AED 0.

Corporate tax due: AED 0 with the relief, against AED 56,250 without it.

If the same business has revenue of AED 3,200,000 in the period ending 31 December 2028 (also an illustration), the relief is unavailable for 2028 and for every later period, including 2029 even if revenue falls back below AED 3,000,000. From 2028, tax is worked out on taxable income in the usual way.

What you still have to do

Electing removes the tax, not the compliance. The business remains a taxable person, so it stays registered and files a return for every tax period.

Return deadline

9 months after the end of the Tax Period

A Taxable Person must file its Corporate Tax Return no later than nine months from the end of the relevant Tax Period, unless the Federal Tax Authority directs another date.

The return is a simplified one. Financial statements, which every other taxable person must attach to the return, do not have to be attached when the relief is elected (FTA Tax Returns guide, section 22.4). Article 21(3) of the Corporate Tax Law lets the FTA check that the conditions are met and ask for records within a time it sets, so the business keeps evidence that revenue stayed within the limit in every period.

How long records are kept

7 years

Taxable Persons must keep the records and documents that support their Corporate Tax Returns for seven years after the end of the Tax Period to which they relate; Exempt Persons must keep records that show their exempt status for the same period.

The FTA’s guide gives examples of that evidence: bank statements, sales ledgers, invoices or till rolls, order records and delivery notes, and business correspondence. Records need not be kept in their original form: paper receipts, for example, can be scanned and stored electronically, as long as the records stay readable and available to the FTA on request. The relief does not change VAT: a VAT-registered business keeps charging VAT and filing VAT returns as before.

The rest of the corporate tax rules are collected in the corporate tax guides.