In short
- Revenue of AED 3 million or less in the tax period and in every earlier one.
- Extended on 29 July 2026 to tax periods ending on or before 31 December 2029.
- At a profit of AED 1,000,000 the election saves AED 56,250 of corporate tax.
- A loss of an election year is not carried forward: on AED 1,000,000 that can cost AED 90,000.
In this guide
What is Small Business Relief?
It is an election under Article 21 of the corporate tax law. A resident person whose revenue is AED 3 million or less is treated as having no taxable income for that tax period. There is no tax to pay, no taxable income to work out, and the return is a simplified one. Revenue decides, and profit does not: the higher the margin, the more the relief saves.
| Profit on revenue of AED 2,800,000 | Tax at the standard rates | Tax with the relief |
|---|---|---|
| AED 800,000 | AED 38,250 | None |
| AED 1,000,000 | AED 56,250 | None |
| AED 1,500,000 | AED 101,250 | None |
The figures are the Federal Tax Authority's own: 0% on the first AED 375,000 of profit and 9% on the rest. The election is made in the yearly return, so the company registers for corporate tax first: see corporate tax registration in the UAE.
Is there an extension? What Decision No. 131 of 2026 changed
Yes. Ministerial Decision No. 73 of 2023 gave the relief to tax periods that start on or after 1 June 2023 and end by 31 December 2026. Ministerial Decision No. 131 of 2026, issued on 29 July 2026 and announced by the Ministry of Finance on 7 August, replaced that end date with 31 December 2029. Nothing else changed: the AED 3 million limit, the people who can elect and the way of electing stay as they were.
| Financial year ends | Return due | Relief |
|---|---|---|
| 31 December 2026 | 30 September 2027 | Yes, as before |
| 31 December 2027 | 30 September 2028 | Yes, added by the decision |
| 31 December 2028 | 30 September 2029 | Yes, added by the decision |
| 31 December 2029 | 30 September 2030 | Yes, the last calendar year |
| 31 March 2030 | 31 December 2030 | No |
A company that had planned for 9% from 2027 has three more calendar years. Under the decision in force, the first calendar year outside the relief is 2030.
Who can elect and who cannot
| Who | Can elect |
|---|---|
| A mainland company | Yes |
| A free-zone company that is not a Qualifying Free Zone Person | Yes |
| A Qualifying Free Zone Person | No, unless it first elects for the standard rates |
| An individual in business with turnover above AED 1 million | Yes |
| A foreign company managed and controlled in the UAE | Yes |
| A foreign company with an office in the UAE | No; a tax treaty with a non-discrimination clause can open the relief to the office |
| A member of a multinational group with revenue above AED 3.15 billion | No |
| A tax group | Yes, with AED 3 million counted for the group as a whole |
A free-zone company chooses between two routes. As a Qualifying Free Zone Person (QFZP) it pays 0% on qualifying income, has its accounts audited and keeps other revenue within 5%. Under the relief it pays nothing on any income, with no audit required by the tax rules and no test of who the customer is. The first route is set out in the Qualifying Free Zone Person rules.
The AED 3 million test: what counts as revenue
Revenue is the gross income of the tax period, before any cost, measured under the accounting standards. A business with revenue of AED 3 million or less may keep its accounts on a cash basis. The test takes in more than sales:
- sales of goods and services, in the UAE and abroad
- the proceeds of selling an asset: a vehicle, a shop, a part of the business
- dividends and other income that are exempt from tax in an ordinary return
- goods or services received in a barter, at market value
VAT charged to customers is left out. Two examples from the tax authority show the edge. A trader with revenue of AED 1,850,000 in 2024 sells his shop for AED 1,200,000 in 2025, and revenue for that year reaches AED 4,150,000. He has no relief that year or in any later one. A company with sales of AED 2,500,000 receives AED 1,000,000 of dividends from a UAE company: revenue is AED 3,500,000, and the relief is closed.
What the election changes in the return
| Item | With the election | Without it |
|---|---|---|
| Registration with the tax authority | Required | Required |
| Tax return | Simplified | Full |
| Calculation of taxable income | Not needed | Needed |
| Corporate tax | None | 0% on taxable income up to AED 375,000, 9% above |
| A loss made in the year | Lost | Carried forward |
| Losses of earlier years | Kept for a later year without the election | Set against up to 75% of taxable income |
| Transfer pricing documentation | Not required | Required where the rules apply |
| Arm's length prices with related parties | Required | Required |
The rules on exempt income, deductions and the interest cap do not apply in an election year, and neither do the reliefs for transfers inside a group and for restructuring. Net interest of that year cannot be carried forward. Interest disallowed in an earlier year stays available, but the ten tax periods allowed for using it keep running.
The records stay. A business must be able to show its revenue for every period: bank statements, sales ledgers, invoices, order records. They are kept for seven years after the period, so until 31 December 2033 for the year 2026. VAT is untouched by the relief. We keep these books and file the return with the election: see accounting services in Dubai and the UAE.
We do this for you Corporate tax registration in the UAE from $350 a month with accounting
A worked example: four years of a consultancy
A consultancy with a calendar financial year grows past the limit in its third year. Its taxable income is taken as equal to its profit.
| Year | Revenue, AED | Profit, AED | Corporate tax |
|---|---|---|---|
| 2026 | 2,400,000 | 900,000 | None: election made, AED 47,250 saved |
| 2027 | 2,900,000 | 1,100,000 | None: election made, AED 65,250 saved |
| 2028 | 3,400,000 | 1,300,000 | AED 83,250: revenue is above the limit |
| 2029 | 2,700,000 | 1,000,000 | AED 56,250: the relief does not return |
Over the two years of the election the company saves AED 112,500. From 2028 it pays 9% on profit above AED 375,000, and the lower revenue of 2029 changes nothing, because 2028 stays in its history.
When it pays not to elect
In a loss year the election gives nothing and takes the loss away. The tax authority's example: a company in its first year has revenue of AED 2,500,000 and costs of AED 3,500,000. With the election the loss of AED 1,000,000 is not declared and cannot be used later. Without it the company files a full return and carries the loss forward, where it can save up to AED 90,000 of tax at 9%.
A start-up that expects losses first and profit later should compare the two routes year by year. The choice is free each year: a company may skip the election in a loss year and make it in the next.
With a profit under AED 375,000 the tax is nil on either route. The election still brings the simplified return and removes the transfer pricing documentation.
A company inside a group has two more reasons to wait. In an election year it cannot pass its losses to a sister company. A sale of assets between group members cannot be recorded at book value either, so the seller pays tax on the gain.
Splitting a business to stay under AED 3 million
Decision No. 73 of 2023 closes this route. Where the tax authority finds a business was separated artificially and the parts together earn more than AED 3 million, it treats the arrangement as one made to obtain a tax advantage. The tax is then due as if there had been no split, and a penalty may be added.
- By function: a hotel moves its restaurant, which serves hotel guests alone, into a second company.
- By place: three laundrettes of one owner in three districts of Dubai, with revenue of AED 2,500,000, AED 2,000,000 and AED 2,100,000.
- By time: an owner closes a company at AED 2,800,000 of sales and opens the next one for the same clients.
The authority asks two questions: whether the separation has a valid commercial purpose, and whether the parts carry on substantially the same business. It looks at shared premises, staff, managers, customers and money. Separate companies with a real reason behind them pass: its own example is a franchise.
How to elect for Small Business Relief
- Register for corporate tax in EmaraTax and receive the tax registration number.
- Close the accounts for the year. With revenue of AED 3 million or less a cash basis is allowed.
- Check the revenue of the year and of every earlier tax period against AED 3 million.
- In the corporate tax return for the year, make the election and complete the simplified return.
- File within nine months of the year end: by 30 September 2027 for 2026.
- Repeat the election in each year's return and keep the records for seven years.
A return filed without the election cannot be reopened to claim the relief for that year.
We register the company for UAE corporate tax, check the test each year and file the return with the election. How the tax is worked out once the relief ends is in corporate tax in the UAE.
