Small Business Relief Under UAE Corporate Tax — Complete Guide

What Is Small Business Relief?

Small Business Relief is a provision under the UAE's Federal Decree-Law No. 47 of 2022 designed to reduce the corporate tax burden on smaller businesses. Eligible businesses with annual revenues below AED 3 million are exempt from paying corporate tax — allowing them to reinvest savings into growth and operations.

Key Highlights

• Revenue limit: Businesses earning under AED 3 million annually qualify
• Corporate tax exemption: No tax due on profits up to the threshold
• Filing still required: Even with zero tax, businesses must file returns
• Valid until: December 31, 2026 (subject to extension)

Who Qualifies for Small Business Relief?

1. Revenue Threshold

Your business must have less than AED 3 million in annual revenue. This threshold applies for each tax period until December 31, 2026. If revenue exceeds AED 3 million in a given year, your business loses eligibility for the following period.

2. UAE Resident Status

Only UAE-resident businesses qualify — companies incorporated in the UAE, those in free zones, and businesses controlled and managed from within the country.

3. Tax Registration

Your business must be registered for corporate tax and hold a Tax Registration Number (TRN).

4. You Must Opt In

Small Business Relief is not automatic. You must notify the Federal Tax Authority (FTA) by filing the appropriate documentation. If missed, the exemption cannot be applied retroactively.

Who Does NOT Qualify?

Multinational Enterprises (MNEs)

If your business is part of a multinational group with consolidated global revenues over AED 3.15 billion, it will not be eligible — regardless of individual income.

Free Zone Entities (QFZPs)

Businesses that already qualify for the 0% free zone rate (Qualified Free Zone Persons) are ineligible, as they already benefit from favorable rates.

Artificial Structuring

The FTA monitors businesses that artificially split operations to stay below the revenue cap. Penalties include retroactive tax payments and fines.

How Small Business Relief Works

If your business qualifies:

• Profits up to AED 375,000: No corporate tax (this applies to all businesses)
• Profits above AED 375,000: Normally taxed at 9%, but exempt under SBR
• Simplified accounting: Small businesses can use the cash basis of accounting

What About VAT?

Small Business Relief does not affect VAT obligations. Even if you're exempt from corporate tax, you must still collect and remit VAT on taxable sales. However, VAT collected is not part of the corporate tax calculation and doesn't impact SBR eligibility.

Trade-Offs to Be Aware Of

When opting for Small Business Relief, certain corporate tax provisions will not apply:

• Tax loss carryforward: You cannot carry forward losses to offset future income
• Interest deduction limitations: The usual rules are waived under SBR
• Exempt income provisions: Other exemptions become unnecessary since revenue is treated as non-taxable

This means SBR is best for businesses that are genuinely small and don't expect to exceed the threshold soon. If you're growing rapidly, the loss carryforward trade-off may not be worth it.

How to Claim Small Business Relief

1. Ensure your business meets all eligibility criteria
2. Register for corporate tax and obtain your TRN
3. File the SBR election with the FTA during your tax return
4. Maintain proper records even though no tax is due

Need Help With Small Business Relief?

Our corporate tax team helps small businesses navigate the SBR application process, ensure eligibility, and file correctly with the FTA. Contact us today for a free consultation.