If you run a small business in the UAE, there is significant news that could save you thousands of dirhams in corporate tax. The Ministry of Finance has officially extended the Small Business Relief (SBR) programme through 31 December 2029 under Ministerial Decision No. 131 of 2026.
This means qualifying businesses with annual revenue of AED 3 million or less can continue to be treated as having no taxable income for several more years.
In this guide, we explain how small business tax in the UAE works, who qualifies for SBR, how to claim it, and the common mistakes that can cause businesses to lose their eligibility.
What Is Small Business Relief in the UAE?
Small Business Relief is a provision under Article 21 of Federal Decree-Law No. 47 of 2022, the UAE Corporate Tax Law.
It allows eligible resident persons, including sole establishments, partnerships, and companies, to elect to be treated as having no taxable income for a particular tax period.
SBR is technically not a 0% tax rate. Instead, it is an exemption where taxable income is treated as nil for the elected period, provided the business meets the required conditions.
Key Update — August 2026
Ministerial Decision No. 131 of 2026 extends Small Business Relief to tax periods commencing on or after 1 June 2023 and ending on or before 31 December 2029. Previously, the relief was expected to expire at the end of 2026.
Who Does Small Business Relief Apply To?
A business must meet all the required conditions to qualify:
1. You Must Be a Resident Person
This can include companies incorporated in the UAE, certain branches of foreign companies, and natural persons conducting business who meet the applicable conditions.
Non-resident persons with only a UAE permanent establishment are not eligible under the conditions described in the source.
2. Revenue Must Not Exceed AED 3 Million
Your revenue must not exceed AED 3,000,000 for the current tax period and relevant previous tax periods.
Importantly, the AED 3 million limit refers to gross revenue, not profit.
3. You Must Not Be a Qualifying Free Zone Person
A business that already qualifies for the relevant 0% Free Zone tax regime cannot also elect Small Business Relief.
4. You Must Not Be Part of a Large MNE Group
The business must not belong to a Multinational Enterprise Group with consolidated group revenue exceeding AED 3.15 billion.
5. You Must Actively Elect SBR
Small Business Relief is not automatic. The business must elect the relief on its Corporate Tax Return for each relevant tax period.
Key Rules and Requirements
Revenue Is Measured Cumulatively
The AED 3 million threshold is not simply a test for the current year.
According to the blog, revenue must remain at or below AED 3 million in every relevant tax period. If the business exceeds AED 3 million in a previous relevant period, it loses eligibility for subsequent periods.
Corporate Tax Registration and Filing Are Still Mandatory
Claiming SBR does not remove the requirement to register for Corporate Tax.
Businesses must register with the FTA, obtain a Tax Registration Number (TRN), and file their Corporate Tax Return within the applicable deadline.
Penalties
The blog highlights the following penalties:
- AED 10,000 for late Corporate Tax registration
- AED 500 per month for late filing during the first 12 months
- AED 1,000 per month thereafter
- 14% per annum late-payment penalty under the rule cited in the blog
These penalties can apply even where a business is eligible for SBR.
Arm’s Length Principle Still Applies
Businesses claiming SBR must still ensure that Related Party and Connected Person transactions follow the arm’s length principle.
The blog notes that detailed Transfer Pricing documentation such as the Local File and Master File is generally not required for SBR claimants, but transactions still need to be commercially reasonable.
No Carried-Forward Losses
If SBR is elected for a tax period, tax losses from that period cannot be carried forward because taxable income is treated as nil.
Simplified Bookkeeping
Businesses electing SBR may use cash-basis accounting, but they still need adequate records to demonstrate that their revenue remains within the required threshold.
How to Claim Small Business Relief
Step 1 — Register on EmaraTax
Register the business through the FTA’s EmaraTax portal and provide the required business documentation.
Step 2 — Obtain Your TRN
The FTA issues a Tax Registration Number after successful Corporate Tax registration.
Step 3 — Calculate Your Revenue
Calculate total gross revenue for the relevant tax period. This includes sales, service fees, commissions, rental income, and other business receipts.
Remember: revenue is not the same as profit.
Step 4 — File Your Corporate Tax Return and Elect SBR
Complete the Corporate Tax Return through EmaraTax and select the option to elect Small Business Relief.
Step 5 — Keep Supporting Documents
Maintain relevant documents such as:
- Trade licence
- Financial statements or accounting records
- Bank statements
- Invoices
- Revenue supporting documents
Step 6 — Repeat the Election Every Year
SBR must be elected on each Corporate Tax Return. It does not automatically carry forward.
Common Mistakes to Avoid
1. Forgetting to Elect SBR
SBR is not automatically applied. The business must actively elect it on the Corporate Tax Return.
2. Miscalculating Revenue
A business should not confuse profit with revenue.
For example, a business with AED 4 million in sales and AED 2.5 million in expenses has AED 4 million in revenue, not AED 1.5 million.
3. Ignoring the Cumulative Threshold
Eligibility does not simply reset every year. Exceeding the threshold in a relevant previous period can affect future eligibility.
4. Failing to Register for Corporate Tax
Being eligible for SBR does not mean a business can skip Corporate Tax registration.
5. Artificially Splitting Businesses
Businesses should not artificially divide operations simply to remain below the AED 3 million threshold.
6. Not Maintaining Proper Records
Businesses must maintain sufficient records to demonstrate that they meet the SBR requirements.
How Tax Falcon Can Help
Tax Falcon is an FTA-approved tax advisory firm, Registration No. 20056800, based in Abu Dhabi.
The team can assist UAE SMEs with:
- SBR eligibility assessment
- Corporate Tax registration
- Corporate Tax Return filing with SBR election
- Growth and tax planning
- FTA audit support
Frequently Asked Questions
Is Small Business Relief the same as a 0% Corporate Tax rate?
Not exactly. Under SBR, taxable income is treated as nil for the elected period. It is technically an exemption rather than a reduction in the Corporate Tax rate.
What happens if revenue exceeds AED 3 million for one year and then falls below it?
According to the blog, exceeding the threshold in a relevant period means the business cannot re-qualify in later periods simply because its revenue falls below AED 3 million.
Do I still need to register for Corporate Tax if I qualify for SBR?
Yes. Corporate Tax registration remains mandatory, and the SBR election is made through the Corporate Tax Return.
Can a Free Zone company claim SBR?
A Qualifying Free Zone Person cannot claim SBR at the same time. The applicable status and conditions need to be considered before making the election.
How long is Small Business Relief available?
Under Ministerial Decision No. 131 of 2026, the blog states that SBR is available for qualifying tax periods ending on or before 31 December 2029.
Need Help With Small Business Tax in the UAE?
Whether you need help checking your eligibility, registering for Corporate Tax, or filing your return with the SBR election, Tax Falcon’s advisors can assist.
Tax Falcon UAE
Phone: +971 56 973 0073
Email: support@taxfalconuae.com
Website: taxfalconuae.com
Address: Level 1, Yas Mall, Yas Island, Abu Dhabi