Small Business Relief - UAE Corporate Tax (Complete Guide)

Small Business Relief - UAE Corporate Tax is a smart, short-term measure that reduces the burden of UAE corporate tax on smaller businesses. It can help you save cash, stay compliant, and focus on growth. But it’s not automatic, and the AED 3M threshold means that one strong growth year could remove your eligibility.

Mehreen Rauf Khan

10/23/20254 min read

The UAE’s Small Business Relief (SBR) offers eligible small companies and sole traders a much-needed break under the new corporate tax regime — potentially reducing their corporate tax to 0% for qualifying periods. This guide explains who qualifies, how to elect for the relief, key deadlines, and what small business owners need to watch out for.

Quick Summary

Small Business Relief - UAE Corporate Tax allows UAE resident businesses with revenue of AED 3 million or less in both the current and all previous tax periods to pay 0% corporate tax for that period. It is a temporary relief that applies to tax periods ending on or before 31 December 2026. Businesses must still register and file a return but can elect for the relief each year.

What Is Small Business Relief?

Small Business Relief is a simplified system created to ease the transition of small businesses into the corporate tax regime. Instead of going through complex tax calculations, eligible businesses can opt to treat the tax period as “out of scope” — meaning they do not have to pay corporate tax for that year. This helps small operators focus on growth rather than compliance during the early years of the UAE corporate tax rollout.

Who Qualifies for the Relief?

To benefit from SBR, you must meet specific criteria:

Resident Person: The business must be a UAE resident for corporate tax purposes. This includes both companies (LLCs, partnerships, etc.) and individuals conducting business in the UAE.
Revenue Limit: Total revenue must not exceed AED 3,000,000 in the current tax period and in all previous tax periods.
Exclusions: Members of multinational enterprise groups and certain free zone entities (like qualifying free zone persons) cannot claim this relief.
Annual Election: The relief is optional and must be elected for each tax period when filing the corporate tax return.

Remember, the test is based on revenue (total receipts) — not profit. Even if your profits are low, your gross revenue must stay under the AED 3 million threshold to qualify.

How Long Does It Apply?

Small Business Relief applies to tax periods beginning on or after 1 June 2023 and ending on or before 31 December 2026. After this date, it may expire or be replaced by a different support mechanism. Small businesses should prepare now for the possibility that the relief will not continue beyond 2026.

How to Elect for Small Business Relief

1. Register for Corporate Tax:
All businesses, even those eligible for relief, must first register for corporate tax through the EmaraTax portal.

2. Check Your Revenue:
Use accurate accounting records to calculate your total revenue for the year. The calculation must follow UAE-approved accounting standards.

3. File Your Corporate Tax Return:
The election for SBR is made within the corporate tax return. It is not automatic and must be selected for every tax period you wish it to apply.

4. Keep Proper Records:
Even if your tax payable is zero, you are still required to maintain complete accounting records and supporting documents (invoices, receipts, contracts, etc.) to prove eligibility.

5. Reassess Annually:
Because eligibility depends on current and all previous periods, exceeding the AED 3 million limit in any year will disqualify you from SBR in future periods.

Interaction with Other Tax Rules

Different from the AED 375,000 Profit Band:
Don’t confuse the Small Business Relief with the 0% tax rate on the first AED 375,000 of taxable income. SBR is based on total revenue, not profit.
Losses and Interest Deductions:
If you elect SBR, you cannot use or carry forward tax losses or interest deductions for that period. These are temporarily “frozen.”
Free Zone Companies:
Many free zone entities have their own qualifying tax status. SBR generally does not apply to “qualifying free zone persons,” so double-check your entity type before making an election.

Common Mistakes to Avoid

Using Profit Instead of Revenue:
The AED 3M test is based on total income, not net profit.
Forgetting Previous Years:
The AED 3M limit applies to both the current and all previous tax periods — not just this year.
Assuming It’s Automatic:
You must actively choose SBR when filing your tax return each year.
Failing to File a Return:
Even if no tax is due, every business must still file a return and keep records.
Ignoring Exclusions:
Large business groups and qualifying free zone persons are not eligible.

Examples of How It Works

Example 1 — Freelancer:
Sara, a freelance designer, earned AED 1.2 million in 2024 and AED 800,000 in 2023. She qualifies for SBR for both years and can pay 0% corporate tax while still filing her return.

Example 2 — Small Trading Company:
ABC Traders earned AED 2.7 million in 2023 and AED 3.2 million in 2024. Because 2024 revenue exceeded AED 3M, the company loses eligibility for SBR starting in 2024 and future years.

Example 3 — Free Zone Start-Up:
A start-up in a free zone with AED 2.5 million in revenue must check whether it is classified as a “qualifying free zone person.” If it is, SBR may not apply even if revenue is below the threshold.

Checklist Before You Apply

✅ Are you a UAE Resident Person for corporate tax purposes?
✅ Is your revenue ≤ AED 3,000,000 for this and all prior tax periods?
✅ Are you not part of a multinational group?
✅ Have you registered on EmaraTax?
✅ Are your records complete and up-to-date?
✅ Do you understand that SBR periods suspend loss and interest deductions?

If you can tick all of the above, you’re likely eligible to claim SBR for your next tax filing.

Final Thoughts

Small Business Relief is a smart, short-term measure that reduces the burden of UAE corporate tax on smaller businesses. It can help you save cash, stay compliant, and focus on growth. But it’s not automatic, and the AED 3M threshold means that one strong growth year could remove your eligibility.

Plan ahead, track your revenue carefully, and stay aware of how your business structure (especially if you operate in a free zone) may impact your ability to claim the relief.

If you’re unsure about your eligibility or how to make the election correctly, seek professional help — a quick review can prevent costly mistakes later.

Need help filing or checking eligibility?
Our tax advisory team assists small businesses with:

Revenue calculation and eligibility assessment
EmaraTax registration and filing
Tax planning beyond 2026