Small Business Relief is an election under Article 21 of the UAE Corporate Tax Law that treats a resident taxable person as having no taxable income for a tax period, provided revenue in that period and every earlier period did not exceed AED 3 million. It was originally limited to tax periods ending on or before 31 December 2026. On 29 July 2026 the Ministry of Finance issued Ministerial Decision No. 131 of 2026, extending the relief to tax periods ending on or before 31 December 2029. The threshold did not change.
What the relief does
A person who elects Small Business Relief is treated as having derived no taxable income for the period. There is no corporate tax to pay and no need to compute taxable income, apply the deduction rules or work through transfer pricing documentation thresholds for that period. The 0 percent band on the first AED 375,000 of taxable income and the 9 percent rate above it simply do not come into play.
The relief is designed for start-ups, micro-businesses and natural persons carrying on business in the UAE. It reduces the compliance burden more than it reduces tax, because most businesses below the threshold would owe little tax anyway.
Who can elect it
The conditions are set out in Ministerial Decision No. 73 of 2023 as amended. The person must be a resident person for corporate tax purposes, including a natural person conducting business. Revenue in the current tax period and in all previous tax periods must not exceed AED 3 million. Revenue is measured under the accounting standards accepted in the UAE.
Two groups are excluded regardless of revenue. A Qualifying Free Zone Person cannot elect Small Business Relief, because that person is already inside the free zone regime with its own 0 percent rate on qualifying income. A constituent entity of a multinational group with consolidated revenue above AED 3.15 billion, the threshold used for country-by-country reporting, is also excluded.
What the election costs
Electing has three consequences beyond the paperwork. Tax losses incurred in an elected period cannot be carried forward. Disallowed net interest expenditure from an elected period cannot be carried forward either. And the Federal Tax Authority can treat the artificial separation of a business into several entities to stay under AED 3 million as an arrangement to obtain a corporate tax advantage under the general anti-abuse rule in Article 50.
For a business expecting to grow past the threshold within two or three years, a loss-making early period may be worth more as a carried-forward loss than as a relieved period. The election is made period by period, so the decision can change.
What stays in place
The extension does not remove registration. Every taxable person, including one that will elect Small Business Relief, must register with the Federal Tax Authority, file a corporate tax return within nine months of the end of the tax period and keep records for seven years. Late registration and late filing penalties apply regardless of whether any tax is due.
