What the relief does
Small Business Relief is a generous, opt-in election created by Ministerial Decision 73 of 2023 under Article 21 of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022). For tax periods ending on or before 31 December 2026, a UAE Resident Person whose revenue does not exceed AED 3 million in the relevant tax period — and in every previous tax period since 1 June 2023 — can elect to be treated as having no taxable income for that period.
The effect: no corporate tax payable, simplified accounting under cash basis (with FTA approval), no need to compute taxable income according to the full IFRS-adjusted framework. The compliance burden drops dramatically.
Who qualifies
- UAE Resident Person — natural or juridical (the relief applies to both, with separate AED 3M revenue testing).
- Revenue in the current tax period and every previous tax period since 1 June 2023 at or below AED 3M. One year above kills the relief permanently going forward.
- The Person is not part of a Multinational Enterprise Group with consolidated revenue exceeding EUR 750M (Pillar Two threshold).
- The Person is not a Qualifying Free Zone Person — the QFZP 0% regime and Small Business Relief are mutually exclusive.
- An election has been made on the annual corporate tax return.
Who does not qualify
- Qualifying Free Zone Persons. If you hold the QFZP 0% on Qualifying Income, you cannot also claim Small Business Relief. You choose one regime — whichever serves the business better.
- Constituent Companies of MNE Groups with consolidated revenue above EUR 750M — these sit within the Pillar Two perimeter and Cabinet Decision 142/2024 (DMTT).
- Banks, insurers, financial-services entities within specific scope.
- Persons who have artificially fragmented activity to keep each entity below AED 3M — the FTA has general anti-abuse powers under Article 50 of the Corporate Tax Law and will collapse fragmented groups.
How "revenue" is measured
Revenue here means accounting revenue under acceptable accounting standards (IFRS or IFRS for SMEs), not "taxable income". A high-margin business with AED 2.5M revenue but AED 2M profit qualifies. A low-margin business with AED 5M revenue but AED 200k profit does not.
Revenue is measured for the tax period (financial year) of the Person, not for the calendar year. If you change financial-year-end, the revenue test is applied to each tax period including any short transitional period.
The election and its consequences
The election is made on the annual Corporate Tax return. It applies for one tax period and must be re-made each year. The election cannot be made retrospectively — if you forget to elect on the return for a year you qualified, you cannot claim it later.
While elected, the Person:
- Has no taxable income for the period — so no corporate tax payable.
- Cannot use any tax losses carried forward (they remain available for years you do not elect).
- Cannot use General Interest Deduction Limitation Rule carry-forwards.
- Can apply cash-basis accounting under Ministerial Decision 114 of 2023 if revenue is under AED 3M (which it must be to qualify anyway).
- Must still register with the FTA, file the annual return (electing the relief), maintain books, and comply with all non-tax obligations (UBO, AML, VAT if applicable).
SBR vs QFZP — which to take
| Feature | Small Business Relief | QFZP 0% |
|---|---|---|
| Tax rate | 0% (deemed no taxable income) | 0% on Qualifying Income, 9% on non-Qualifying |
| Revenue cap | AED 3M | No revenue cap; de minimis on non-Qualifying Income (5% / AED 5M) |
| Substance requirement | None additional | Adequate substance in the Free Zone |
| Eligible activity | Any (with exclusions) | List of "Qualifying Activities" in MD 265/2023 |
| Accounting | Cash basis available | Audited accounts required |
| Sunset | Tax periods to 31 Dec 2026 | No sunset (regime is permanent) |
| Election needed | Yes, annually | Default if conditions met; opt-out election available |
In broad terms: SBR is right for genuine early-stage businesses that may exceed AED 3M later. QFZP is right for higher-revenue free-zone businesses with qualifying activities and substance.
The fragmentation trap
The FTA explicitly addressed artificial fragmentation in the public clarifications: setting up two or three sister companies each under AED 3M to use the relief multiple times is a "specific anti-abuse" target. Where the FTA determines the arrangement's main purpose was to obtain a corporate-tax advantage, it can disregard the structure under Article 50.
What happens after 2026
The current relief sunsets for tax periods ending after 31 December 2026. The Cabinet may extend it, narrow it, or replace it — we have no formal indication either way as at May 2026. Founders building businesses on the current relief should model a 9% rate for FY27 and plan accordingly.
