Small Business Relief
Small Business Relief: Paying Zero Corporate Tax Under AED 3 Million
Small business relief is the regime's pressure valve for small companies: elect it while revenue stays within AED 3 million and the period produces no taxable income at all. It is an election, not an exemption — you still register, still file, and still have to choose it wisely.
- Eligibility verified across all relevant periods
- The election filed correctly in your return
- Losses and interest trade-offs explained before electing
- Exit planning for the year you outgrow it
Dubai-based, FTA-aware corporate tax filing support for UAE businesses.
Quick Answer
A resident taxable person with revenue of AED 3 million or less in the current and all previous tax periods (for periods ending on or before 31 December 2029) can elect small business relief — the period is treated as producing no taxable income, so no tax is due. QFZP-claiming free zone entities and members of large multinational groups are excluded. The relief must be elected in the return, and it suspends loss carry-forward and interest deductions for that period.
The Eligibility Tests
The ceiling is unforgiving: AED 3 million revenue in the current period and every prior period under the regime. Breach it once and the relief is gone for good, even if revenue later falls. Revenue means gross income, not profit — a low-margin trader can be highly profitable-adjacent and still fail on turnover.
- Resident taxable persons only (companies and individuals)
- Revenue ≤ AED 3m in current and all earlier periods
- Excluded: QFZP claimants and constituent members of large MNE groups
- One historical breach permanently ends eligibility
What the Election Actually Does — and Costs
Electing SBR deems the period to have no taxable income: no tax, and a dramatically simplified computation. The trade-offs are real, though. Losses that would have arisen cannot be carried forward from an SBR period, and net interest expense from it cannot be banked either. A start-up burning cash may be better served by skipping the relief and preserving its losses for profitable years.
- No taxable income, no tax for the elected period
- Simplified compliance and record demands
- No loss carry-forward generated from the period
- Unused interest capacity from the period is lost
Planning Around the Horizon
Ministerial Decision No. 131 of 2026 extended the relief to tax periods ending on or before 31 December 2029, with the AED 3 million threshold unchanged — three more years of runway, but still a runway rather than a permanent state. The planning questions: elect or preserve losses this year, manage revenue recognition near the AED 3m line honestly, and prepare the full-computation discipline for the first post-relief period.
- 1Confirm eligibility across all periods to date
- 2Model electing vs preserving losses on real numbers
- 3Elect in the return where it wins
- 4Build full computation readiness for life after SBR
Revenue vs Profit: The Distinction That Trips People
The AED 3 million ceiling is measured on revenue — gross income — not on profit. This catches out high-turnover, low-margin businesses: a trader billing AED 4 million on thin margins is over the line even if its profit is modest, while a consultancy billing AED 2 million is comfortably within it despite being highly profitable. Reading the test as a profit threshold is one of the most common and costly misunderstandings of the relief.
- The ceiling is gross revenue, not profit
- High-turnover, low-margin businesses can breach it while barely profitable
- Lower-turnover, high-margin businesses often stay within it
- Measure the test on total revenue for the period
A Worked Decision: Elect or Preserve Losses
Electing small business relief is not automatically the right move. Consider a start-up with AED 2 million revenue that made a loss this year. Electing SBR gives it zero tax — but a loss-making company already owes no tax, and electing means it cannot carry that loss forward to shelter future profits. Preserving the loss could be worth far more than a relief it did not need. The decision turns on whether you are profitable now and expect to be later, which is exactly why it should be modelled rather than assumed.
- A loss-making company already pays no tax without electing
- Electing SBR forfeits loss carry-forward from that period
- Preserved losses can shelter future profits at 9%
- Model both paths before choosing on the return
Why SBR and Free Zone Status Don't Mix
A Qualifying Free Zone Person cannot also claim small business relief — the two regimes are mutually exclusive. A free zone entity therefore chooses between defending QFZP 0% on its qualifying income and stepping into the standard regime, where SBR and the AED 375,000 zero band are available. For a small free zone company with modest qualifying income and real QFZP compliance costs, the standard regime plus SBR can be simpler and no more expensive — another reason to model both before deciding.
- QFZPs are excluded from small business relief
- It's a choice: defend 0% QFZP status or take the standard regime
- Standard regime opens SBR and the AED 375,000 band
- For small qualifying income, SBR can be simpler and as cheap
What is small business relief in UAE corporate tax?
An election letting resident businesses with revenue of AED 3 million or less be treated as having no taxable income for the period — no tax due, simplified compliance.
Who cannot claim small business relief?
Qualifying free zone persons and members of multinational groups above the large-group threshold — and anyone whose revenue ever exceeded AED 3m in a prior period.
Do I still file a return if I claim the relief?
Yes — registration and filing remain mandatory. The relief is claimed inside the return; skipping the return forfeits everything and accrues penalties.
Is claiming SBR always the right choice?
No — electing it sacrifices loss carry-forward and interest banking from the period. Loss-making startups sometimes do better without it.
How long will the relief exist?
It applies to tax periods ending on or before 31 December 2029, extended by Ministerial Decision No. 131 of 2026. You still register, elect it in the return, and file.
Does small business relief apply to VAT?
No. Small business relief is a corporate tax measure only. Your VAT registration and filing obligations are entirely separate and continue regardless of whether you claim SBR.
If I elect SBR, do I still need financial statements?
Yes. You still register, still file the return and still need records and financial statements to evidence that revenue stayed within AED 3 million — the relief simplifies the computation, it does not remove record-keeping.
What happens the year my revenue exceeds AED 3 million?
You lose eligibility — permanently, since the test looks at every prior period too — and move to a full computation at 0%/9%. Building full computation readiness before that year is part of planning around the relief.
Can a free zone company claim small business relief?
Not while claiming Qualifying Free Zone Person status — the two are mutually exclusive. A free zone entity can access SBR only by not claiming the 0% qualifying rate and using the standard regime instead.
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Under AED 3 Million? Decide Deliberately
SBR is free money for some businesses and a losses trap for others. We will model both paths on your numbers and file the election only where it wins.
