Small Business Relief for UAE Corporate Tax (2026): The AED 3 Million Test, the 2029 Extension and When Not to Elect

Small Business Relief is the reason many UAE start-ups, shops and service businesses pay no corporate tax, even when their profit is well above the 0% band. If your business is UAE-resident and its revenue has never exceeded AED 3 million, you can elect to be treated as having no taxable income. The relief was due to end with tax periods finishing on 31 December 2026, but in August 2026 the Ministry of Finance extended it to periods ending by 31 December 2029. This guide is for owners of mainland and free zone companies, sole establishments and freelancers, and their accountants. It covers who qualifies in 2026, who is excluded, how the election works, what you give up, the artificial separation rule, what happens when the relief ends, and worked examples in dirhams.

Quick answer

Small Business Relief lets a UAE-resident business with revenue of AED 3 million or less — in the current tax period and every earlier one — pay no corporate tax. You must still register, file a return and elect for the relief in that return each year. Under Ministerial Decision No. 131 of 2026, it now applies to tax periods ending on or before 31 December 2029.

• Optional, not automatic — elect in each corporate tax return

• Excluded: non-residents, Qualifying Free Zone Persons, MNE groups over AED 3.15 billion

• One period above AED 3 million ends eligibility for good

• In an elected period you can't create or use tax losses

• Splitting a business to stay under the threshold can be challenged by the FTA

What Small Business Relief is

The UAE's corporate tax applies to financial years starting on or after 1 June 2023. Taxable income up to AED 375,000 is taxed at 0% and the excess at 9%. Article 21 of Federal Decree-Law No. 47 of 2022 lets the Minister of Finance set a revenue threshold below which resident businesses can elect to be treated as having no taxable income. Ministerial Decision No. 73 of 2023 set that threshold at AED 3 million.

The Federal Tax Authority's guide on the relief (CTGSBR1) describes two benefits. The tax relief is that you pay no corporate tax for the period, whatever your profit. The administrative relief is that you don't calculate taxable income — no adjustments for exempt income or non-deductible expenses — you file a simplified return, and you can prepare your financial statements on a cash basis, which Ministerial Decision No. 114 of 2023 allows for businesses with revenue of AED 3 million or less.

How much the relief is worth depends on your profit. A business with taxable income under AED 375,000 would pay nothing anyway, so for it the relief is mainly about simpler filing. A business with high margins benefits much more: the FTA's own example shows three businesses with the same AED 2.8 million revenue and profits of AED 800,000, AED 1 million and AED 1.5 million that would otherwise pay AED 38,250, AED 56,250 and AED 101,250 respectively.

Small Business Relief at a glance (2026)

AED 3 million

Revenue threshold

Current and all previous periods

31 December 2029

Last tax period end date

Ministerial Decision 131/2026

0

Corporate tax payable

When elected

9 months

Return and election due

After the end of the tax period

The 2029 extension: Ministerial Decision No. 131 of 2026

As first issued, Ministerial Decision No. 73 of 2023 applied the threshold to tax periods starting on or after 1 June 2023 and only to subsequent periods ending on or before 31 December 2026. Many businesses, and many websites, still plan on that basis.

On 7 August 2026 the Ministry of Finance announced Ministerial Decision No. 131 of 2026, which amends Decision 73 so that the relief continues for tax periods ending on or before 31 December 2029. The Ministry's announcement and commentary on the decision agree that only the end date changed: the AED 3 million threshold, the exclusions and the other conditions stay as they were.

For a business with a calendar financial year, the relief can now cover the years 2024 to 2029. For one with a different year-end, the test is the date the tax period ends: a year ending 30 June 2029 or 31 December 2029 qualifies, but a year running from 1 April 2029 to 31 March 2030 doesn't, because it ends after the cut-off. If your financial year doesn't follow the calendar, check now which of your future periods fall inside the window.

Small Business Relief timeline

April 2023

Ministerial Decision No. 73 of 2023 sets the AED 3 million threshold

1 June 2023

Corporate tax starts for financial years beginning on or after this date; relief available from the first tax period

7 August 2026

Ministerial Decision No. 131 of 2026 extends the relief

31 December 2026

Original end date — no longer the cut-off

31 December 2029

Last tax period end date for the relief

Who qualifies

You can elect for the relief for a tax period if all of these are true:

• You're a resident taxable person. That covers UAE-incorporated companies (mainland and free zone), foreign companies effectively managed and controlled in the UAE, and natural persons who conduct business in the UAE. A non-resident with a permanent establishment in the UAE can't use the relief.
• Your revenue is AED 3 million or less in this tax period. Revenue means the gross income you derive in the period under the accounting standards you apply — not profit, and not just one activity.
• Your revenue was AED 3 million or less in every previous tax period. This is the condition that catches growing businesses: once revenue exceeds the threshold in any period, the relief isn't available for that period or any later one, even if revenue falls back.
• You're not excluded as a Qualifying Free Zone Person or a member of a large multinational group (below).

Natural persons sit on top of an extra rule. An individual is only a taxable person if their business turnover in a calendar year exceeds AED 1 million; salary and personal investment income don't count. A freelancer or sole trader with turnover between AED 1 million and AED 3 million must register by 31 March of the following year and file, but can elect for Small Business Relief and pay no tax. Our freelance visa guide covers the licensing side.

Who is excluded

Qualifying Free Zone Persons. A free zone company that meets the conditions to be a QFZP — adequate substance, qualifying income, non-qualifying revenue within the 5% or AED 5 million de minimis, audited financial statements and so on — already pays 0% on qualifying income under its own regime, and can't elect for Small Business Relief. A free zone company that chooses to be taxed at the normal rates, or that doesn't meet the QFZP conditions, is an ordinary resident person and can elect if its revenue qualifies. Weigh that choice carefully: a company that stops being a QFZP generally can't return to the regime for 5 tax periods.

Members of multinational enterprise groups. The relief isn't available to a member of an MNE group as defined in Cabinet Decision No. 44 of 2020 — broadly, a group with operations in more than one country and total consolidated group revenue of more than AED 3.15 billion. A small UAE subsidiary of a large international group is excluded even if its own revenue is tiny.

Artificially separated businesses. Article 6 of Decision 73 denies the relief where a person splits a business into more than one entity to keep each one below the threshold.

How to claim: register, then elect in the return

The relief isn't automatic and there's no separate application. You claim it in your corporate tax return on EmaraTax:

Claiming Small Business Relief

1. 1

   Register for corporate tax

   Every taxable person must register and get a Tax Registration Number, even if it will claim the relief. Late registration costs AED 10,000.

2. 2

   Check revenue for this and every earlier period

   Confirm revenue was AED 3 million or less in each tax period since your first.

3. 3

   Check you're not excluded

   Not a QFZP, not in an MNE group above AED 3.15 billion, not part of an artificially separated business.

4. 4

   Decide whether electing is worth it

   Compare the tax saved with any loss or interest carry-forward you'd give up.

5. 5

   Elect in the return

   Tick the Small Business Relief election in the return for the period and complete the simplified return within 9 months of the period end.

   Open EmaraTax
6. 6

   Keep revenue records

   Bank statements, sales ledgers, invoices and till records showing revenue for every relevant period.

The election is made period by period. If you file a return for a period without electing, the FTA's guide says you can't claim the relief for that period afterwards — so decide before you file. You still have to keep records that let the FTA confirm your revenue: bank statements, sales ledgers, invoices or till records, order and delivery records and relevant correspondence. Scanned copies are acceptable.

What you give up when you elect

Because an elected period is treated as having no taxable income, some parts of the Corporate Tax Law don't apply to it. The FTA's guide lists them:

Electing vs not electing for a tax period

	Elect Small Business Relief	Don't elect
Register and file a return	Yes (simplified return)	Yes (full return)
Calculate taxable income	No	Yes
Corporate tax payable	None	0% to AED 375,000, 9% above
Create or use tax losses in the period	No	Yes — offset capped at 75% of taxable income
Losses and interest from earlier periods	Kept for a later non-elected period	Usable
Carry forward net interest expenditure from the period	No	Yes
Qualifying group transfers and business restructuring relief	Not available	Available
Transfer pricing documentation	Not required	Required where applicable
Arm's length principle	Still applies	Applies

Register and file a return

Elect Small Business Relief

Yes (simplified return)

Don't elect

Yes (full return)

Calculate taxable income

Elect Small Business Relief

No

Don't elect

Yes

Corporate tax payable

Elect Small Business Relief

None

Don't elect

0% to AED 375,000, 9% above

Create or use tax losses in the period

Elect Small Business Relief

No

Don't elect

Yes — offset capped at 75% of taxable income

Losses and interest from earlier periods

Elect Small Business Relief

Kept for a later non-elected period

Don't elect

Usable

Carry forward net interest expenditure from the period

Elect Small Business Relief

No

Don't elect

Yes

Qualifying group transfers and business restructuring relief

Elect Small Business Relief

Not available

Don't elect

Available

Transfer pricing documentation

Elect Small Business Relief

Not required

Don't elect

Required where applicable

Arm's length principle

Elect Small Business Relief

Still applies

Don't elect

Applies

The loss rule matters most. In an elected period you can't create, use or transfer a tax loss. A loss you make in that year disappears. Losses brought forward from earlier non-elected periods are kept and can be used in the next period in which you don't elect. The same applies to net interest expenditure under the general interest deduction limitation rule. Transfer pricing documentation isn't required while you elect, but related-party transactions must still be at arm's length, which matters later if you leave the relief.

Artificial separation

The FTA can deny the relief if it finds that a business has been artificially split into more than one entity to keep each below AED 3 million. If it does, the business must pay the corporate tax it avoided plus any penalties.

Running more than one company isn't artificial separation in itself — there are good reasons, such as limiting liability for a separate venture. The FTA's guide says it asks two questions: was the separation made for a valid commercial purpose, and is substantially the same business being carried on? It looks at the links between the entities:

• Financial links — does one entity fund another, and could it survive on its own?
• Economic links — do the activities benefit each other, and do they serve the same customers?
• Organisational links — the same premises, equipment, managers, directors or staff; joint marketing; and whether customers would know they were dealing with two different businesses.

A salon owner who moves half her chairs into a second licence at the same address, with the same staff, booking system and customers, is the classic case. Two genuinely separate trades — a restaurant and an unrelated import business, each with its own premises, staff and customers — are unlikely to be.

Worked examples in AED

1. A profitable consultancy that elects. A Dubai mainland marketing agency with a calendar year has revenue of AED 2.8 million and profit of AED 1 million in 2026, and its revenue has never exceeded the threshold. It elects for the relief in its 2026 return, due by 30 September 2027, and pays AED 0. Without the relief it would have paid 9% × (AED 1,000,000 − AED 375,000) = AED 56,250.

2. A loss-making start-up that shouldn't elect. A Sharjah e-commerce company has revenue of AED 1.5 million and a tax loss of AED 300,000 in 2026. If it elects, the loss is lost. In 2027 its revenue grows to AED 3.4 million — above the threshold, so the relief ends — and profit is AED 900,000. If it didn't elect in 2026, it can offset the AED 300,000 loss (within the 75% cap of AED 675,000), leaving taxable income of AED 600,000 and tax of 9% × AED 225,000 = AED 20,250. If it had elected in 2026, 2027 tax would be 9% × AED 525,000 = AED 47,250. Not electing saves AED 27,000.

3. A business that crossed the threshold once. An Abu Dhabi contractor had revenue of AED 3.2 million in 2024 and AED 2.6 million in 2026. Because revenue exceeded AED 3 million in an earlier period, it can't elect for 2026 or any later year, even though it's now under the threshold. With profit of AED 500,000 in 2026, it pays 9% × AED 125,000 = AED 11,250.

4. A non-calendar year at the cut-off. A company with a 31 March year-end and revenue of AED 2 million can elect for the year ending 31 March 2029. The year ending 31 March 2030 ends after 31 December 2029, so it's taxed normally: with profit of AED 600,000, tax is 9% × AED 225,000 = AED 20,250.

5. A freelancer. A Dubai-based designer working as a natural person has business turnover of AED 1.4 million in 2026. She's a taxable person because turnover exceeds AED 1 million, so she registers by 31 March 2027, elects for the relief in her return and pays nothing.

You can run your own numbers in the UAE corporate tax calculator.

When the relief ends — and what to do before then

There are two ways out. The first is growth: in the first tax period in which revenue exceeds AED 3 million, the relief stops and doesn't come back. The second is the calendar: for tax periods ending after 31 December 2029, no one can elect, and every business is taxed at 0% up to AED 375,000 and 9% above, with a full return. The government extended the relief once; whether it does so again is a policy decision, so plan on the current date.

Either way, the full regime brings work the relief let you skip: accrual-based financial statements once revenue is above AED 3 million, adjustments for exempt income and non-deductible expenses such as the 50% limit on client entertainment, interest limitation, and transfer pricing disclosures if your related-party dealings are large. Businesses that move to the full regime in a growth year often find their related-party pricing and bookkeeping weren't set up for it. Getting accrual accounts and arm's-length agreements in place a year before you expect to leave the relief makes the first full return far easier. Our UAE corporate tax guide covers the full regime, and UAE e-invoicing explains the invoicing changes that run alongside it.

Before you elect for Small Business Relief

0/7

• Corporate tax registration done and TRN issued
• Revenue for this and every earlier tax period checked against AED 3 million
• Not a Qualifying Free Zone Person and not in an MNE group above AED 3.15 billion
• No artificial split of one business across several licences
• Tax loss or interest carry-forward you'd give up has been weighed
• Tax period ends on or before 31 December 2029
• Revenue records (bank statements, ledgers, invoices) filed for every period

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Common mistakes

• Not registering because you expect to claim the relief. Registration is compulsory; the AED 10,000 penalty applies regardless.
• Forgetting to elect. The election is in the return. File without it and you can't add it later.
• Electing in a loss year. You lose the loss. Model the next two or three years first.
• Measuring profit instead of revenue. The threshold is on gross revenue for the whole entity.
• Ignoring earlier years. One year above AED 3 million ends eligibility permanently.
• Relying on the old 2026 end date. Periods ending up to 31 December 2029 now qualify, which may change your plans for accounts, audits and restructuring.

Official links

• Ministry of Finance — Small Business Relief extended to 31 December 2029Ministerial Decision No. 131 of 2026
• FTA — Corporate Tax Guide: Small Business Relief (CTGSBR1)Eligibility, election, losses, artificial separation
• FTA — Corporate Tax RegistrationRegister before you elect
• Ministry of Finance — Corporate TaxRates, scope and legislation
• EmaraTaxRegistration and returns

Next steps

Pull your revenue figures for every tax period since your first and confirm none exceeded AED 3 million. Then, before you file your next return, decide whether electing is worth more than any loss you'd forfeit. If you're close to the threshold or to the 2029 cut-off, start preparing for the full regime now with our UAE corporate tax guide.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is Small Business Relief in the UAE?

It's an optional relief under Article 21 of the Corporate Tax Law. A UAE-resident taxable person whose revenue is AED 3 million or less in the current tax period and every earlier one can elect to be treated as having no taxable income. That means no corporate tax to pay and a simplified return. The business must still register with the FTA, file a return each year and keep records.

Has Small Business Relief been extended beyond 2026?

Yes. Ministerial Decision No. 131 of 2026, announced by the Ministry of Finance on 7 August 2026, extends the relief to tax periods ending on or before 31 December 2029. Originally it covered only periods ending by 31 December 2026. The AED 3 million revenue threshold and the other conditions are unchanged.

Who can't claim Small Business Relief?

Non-residents, Qualifying Free Zone Persons and members of multinational enterprise groups with consolidated group revenue above AED 3.15 billion are excluded. So is any business whose revenue exceeded AED 3 million in any earlier tax period. The FTA can also deny the relief where a business has been artificially split into several entities to keep each one under the threshold.

Is Small Business Relief automatic?

No. You must register for corporate tax, obtain a Tax Registration Number and elect for the relief in your corporate tax return for each tax period. If you file a return without making the election, you can't claim the relief for that period later. The return is due within 9 months of the end of the tax period.

What happens to my tax losses if I elect Small Business Relief?

You can't create, use or transfer tax losses in a period for which you elect the relief, so a loss made in that year is lost. Losses brought forward from earlier periods without the relief stay available for the next period in which you don't elect. That's why a loss-making business expecting larger profits later may be better off not electing.

What happens when Small Business Relief ends?

For tax periods ending after 31 December 2029, the normal rules apply to everyone: 0% on taxable income up to AED 375,000 and 9% above it, with full returns. A business that outgrows AED 3 million before then leaves the relief permanently from the period in which its revenue first exceeds the threshold.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Ministry of Finance announces extension of Small Business Relief for Corporate Tax purposes until 31 December 2029 — UAE Ministry of Finance · accessed 9 October 2026
2. 2.Corporate Tax Guide — Small Business Relief (CTGSBR1) — Federal Tax Authority (UAE) · accessed 9 October 2026
3. 3.Ministry of Finance confirms applicable taxable income threshold for Corporate Tax — UAE Ministry of Finance · accessed 9 October 2026
4. 4.Corporate Tax — overview — UAE Ministry of Finance · accessed 9 October 2026
5. 5.Corporate Tax Registration — Federal Tax Authority (UAE) · accessed 9 October 2026
6. 6.UAE Corporate Tax: Small Business Relief extended to 2029 — NTL International · accessed 9 October 2026