Answer first: A UAE business with revenue of AED 3 million or less can elect Small Business Relief and pay 0% corporate tax - but only for tax periods ending on or before 31 December 2026, and only if it still registers and files a return. The relief does not exempt the business from compliance. It reduces the tax rate to zero for qualifying periods. Miss the filing deadline and the FTA penalties apply regardless of whether you owe tax.
Official context: UAE corporate tax rules and FTA Small Business Relief guidance.
Check if your business qualifies for Small Business Relief ->
Who this is for
UAE founders, SME owners, finance managers, and free zone company teams who need to understand registration, filing, relief, and record obligations before an FTA deadline.
Key takeaways
- What Small Business Relief Actually Is.
- Who Qualifies for Small Business Relief.
- The Catch: You Must Still File.
- The 2026 Cliff: What Happens After 31 December.
UAE considerations
For UAE readers, the practical issue is rarely the headline tax concept alone. The decision depends on the company type, tax period, EmaraTax status, books, relief position, and whether the business operates from a mainland or free zone structure. Use this with Finsera's UAE corporate tax registration and filing page and monthly bookkeeping support so the tax position is tied back to records, not assumptions. Treat this guide as a planning aid, then verify the live position against FTA or Ministry of Finance guidance before filing or paying tax.
Common questions
- Is Small Business Relief based on revenue or profit? It is based on revenue - total income from all sources before deducting costs - not profit. A business with AED 2.9 million in revenue and zero profit qualifies. A business with AED 3.2 million in revenue and a loss does not qualify, because the AED 3 million is a revenue ceiling, not a taxable-income test.
- What happens if my revenue exceeds AED 3 million in just one year? You lose the relief for that tax period. You must compute taxable income under the standard rules: 0% on the first AED 375,000 and 9% on the remainder. If revenue drops back below AED 3 million in a subsequent period ending on or before 31 December 2026, you can elect the relief again for that later period.
What Small Business Relief Actually Is
Small Business Relief is an election under Article 21 of Federal Decree-Law No. 47 of 2022, implemented by Ministerial Decision No. 73 of 2023. It allows a resident person with revenue at or below the threshold to be treated as having no taxable income for the period - effectively a 0% rate. The election is made on the corporate tax return itself, not through a separate application. Once elected, the business does not need to compute taxable income in the standard way; it is deemed to have zero taxable income for that period.
The relief is available for tax periods ending on or before 31 December 2026. After that date, the relief sunsets. Businesses with revenue below AED 3 million will fall under the standard rate structure: 0% on the first AED 375,000 of taxable income and 9% on amounts above.
Related: How to calculate UAE corporate tax - from accounting profit to the 9% liability.
Who Qualifies for Small Business Relief
A business must meet all of the following criteria to elect the relief:
- Revenue does not exceed AED 3 million in the relevant tax period. Revenue is measured on an accrual basis unless the business has elected cash-basis accounting.
- The entity is a resident person under Article 11 of the Decree-Law - incorporated in the UAE or effectively managed and controlled from the UAE.
- The entity is not a Qualifying Free Zone Person (QFZP). Free zone entities must meet the separate QFZP regime and cannot elect Small Business Relief.
- The entity is not a member of a Multinational Enterprise (MNE) group with consolidated group revenue exceeding AED 3.15 billion. MNEs are subject to the OECD Pillar Two framework and are excluded from this relief.
- The entity has not elected to be exempt from corporate tax under Article 7 (certain government entities and extractive businesses).
- The election is made on the tax return for the relevant period before the filing deadline.
The AED 3 million threshold is assessed per tax period - typically one financial year. A business that exceeds AED 3 million in one period cannot elect the relief for that period, even if revenue was below the threshold in prior periods.
The Catch: You Must Still File
Small Business Relief is not an exemption from filing. A business that elects the relief must still:
- Register for corporate tax on EmaraTax and obtain a Tax Registration Number
- File an annual corporate tax return by the 9-month deadline
- Maintain accounting records for 7 years
- Include the Small Business Relief election on the return
The FTA has confirmed that the election is claimed by checking the relevant box on the corporate tax return and submitting the return with the required revenue disclosure. No separate form is needed. Failure to file the return triggers the standard late-filing penalty of AED 500 per month, escalating to AED 1,000 per month after 12 months - even if the tax due is zero.
Related: Corporate tax deadlines and penalties for 2026 - every date and penalty you need to know.
The 2026 Cliff: What Happens After 31 December
Small Business Relief is a temporary measure. For tax periods ending after 31 December 2026, all businesses - regardless of revenue - will compute taxable income under the standard rules. The AED 3 million threshold disappears. The standard rates apply: 0% on taxable income up to AED 375,000 and 9% on taxable income above that amount.
| Period Ending | Relief Available? | Tax Rate Applied |
|---|---|---|
| 31 December 2025 or earlier | Yes, if revenue ≤ AED 3M | 0% (deemed zero taxable income) |
| 30 June 2026 | Yes, if revenue ≤ AED 3M | 0% |
| 31 December 2026 | Yes, if revenue ≤ AED 3M | 0% |
| 31 March 2027 | No | 0% on first AED 375,000; 9% above |
| 31 December 2027 | No | 0% on first AED 375,000; 9% above |
Businesses should model their 2027 tax position now. The AED 375,000 standard exemption band means a business with AED 3 million in revenue and, say, AED 2.4 million in deductible costs will face taxable income of AED 600,000 - paying 0% on the first AED 375,000 and 9% on the remaining AED 225,000, for a tax bill of AED 20,250. That is manageable if planned for. It is damaging if unexpected.
Ensure your books are ready for the transition ->
Worked Example: Revenue Scenarios
| Annual Revenue | Costs (assumed) | Taxable Income | Small Business Relief Eligible? | Tax Due |
|---|---|---|---|---|
| AED 1,800,000 | AED 1,400,000 | AED 400,000 | Yes (≤ AED 3M) | AED 0 |
| AED 2,900,000 | AED 2,500,000 | AED 400,000 | Yes (≤ AED 3M) | AED 0 |
| AED 3,200,000 | AED 2,800,000 | AED 400,000 | No (> AED 3M) | AED 2,250 (9% of AED 25,000 above AED 375k) |
| AED 5,000,000 | AED 4,200,000 | AED 800,000 | No (> AED 3M) | AED 38,250 (9% of AED 425,000 above AED 375k) |
| AED 1,800,000 | AED 1,800,000 | AED 0 | Yes (≤ AED 3M) | AED 0 |
Note: Even with zero taxable income, a business electing Small Business Relief must still register and file. The AED 0 tax due does not eliminate the filing obligation.
Cash-Basis Accounting Option
Businesses with revenue at or below AED 3 million may elect to use cash-basis accounting rather than accrual. Under cash basis, revenue is recognised when cash is received and expenses when cash is paid. This simplifies bookkeeping but must be elected and disclosed on the return. Cash-basis accounting is not automatic - it requires an affirmative election.
The cash-basis option aligns with Small Business Relief: a business staying under AED 3 million can use simpler accounting and pay zero tax. The combination is designed to reduce compliance burden for micro and small enterprises.
Related Finsera guides
Decision checklist
- What Small Business Relief Actually Is
- Who Qualifies for Small Business Relief
- The Catch: You Must Still File
- The 2026 Cliff: What Happens After 31 December
