UAE Small Business Relief Extended to 2029: What Businesses Need to Know
The UAE has extended Small Business Relief under the Corporate Tax regime to tax periods ending on or before 31 December 2029. The extension was introduced through Ministerial Decision No. 131 of 2026 and continues the relief previously scheduled to apply only until the end of 2026.
Eligible UAE Resident Persons with revenue not exceeding AED 3 million may elect to be treated as having no Taxable Income for the relevant Tax Period, provided that all applicable conditions are satisfied. The AED 3 million threshold refers to revenue, not profit or Taxable Income. Eligibility is also not automatic. A business must assess its position and make the election for each qualifying Tax Period through its Corporate Tax Return.
Small Business Relief can reduce the Corporate Tax and compliance burden for qualifying businesses, but it does not remove every tax obligation. Registration, record-keeping and return-filing requirements may still apply.
What Is Small Business Relief?
Small Business Relief is an elective provision under the UAE Corporate Tax Law. It allows an eligible Resident Person to be treated as having earned no Taxable Income during the Tax Period for which the relief is claimed. As a result, no Corporate Tax is payable for that Tax Period. The business may also benefit from simplified compliance requirements.
Small Business Relief is not the same as the standard 0% Corporate Tax rate that applies to the first AED 375,000 of Taxable Income. The two provisions use different calculations:
The AED 3 million Small Business Relief threshold is based on revenue
The AED 375,000 standard-rate threshold is based on Taxable Income
Revenue is the gross amount of income earned during the Tax Period before deducting business expenses. Taxable Income is calculated after applying the relevant accounting and Corporate Tax adjustments.
A business with revenue of AED 2.8 million may potentially qualify for Small Business Relief even if it is profitable. A business with revenue exceeding AED 3 million cannot claim the relief, even where its Taxable Income is below AED 375,000 or it has made a loss. The relief is not automatic. An eligible business must elect to apply it through its Corporate Tax Return for each relevant Tax Period.
Who Can Claim Small Business Relief?
Small Business Relief may be claimed by an eligible UAE Resident Person that is subject to Corporate Tax. This may include a UAE resident company or a natural person conducting a taxable business, provided that the relevant conditions are satisfied. The principal eligibility requirements are:
The Taxable Person must be a Resident Person
Revenue must not exceed AED 3 million in the relevant Tax Period
Revenue must not have exceeded AED 3 million in any previous relevant Tax Period
The relief must be elected through the Corporate Tax Return for each qualifying Tax Period
The Tax Period must end on or before 31 December 2029
The person must not fall within one of the excluded categories
The AED 3 million threshold is inclusive. A business with revenue of exactly AED 3 million may qualify, while revenue of more than AED 3 million would place it above the threshold.
The Previous-Period Test
Eligibility depends on both the current Tax Period and the business’s previous relevant Tax Periods. If a business reports revenue of AED 3.4 million in one Tax Period, it cannot claim Small Business Relief in that period. It will also remain ineligible in subsequent periods, even if its revenue later falls below AED 3 million. For example, a business with revenue of AED 2 million in 2027 would not qualify if it recorded revenue of AED 4 million in 2026. Businesses should therefore review their complete revenue history under the Corporate Tax regime rather than assessing the current year in isolation.
Who Cannot Claim Small Business Relief?
A business cannot claim Small Business Relief solely because its revenue is below AED 3 million. The legislation excludes certain persons from the relief. The principal exclusions include:
A Qualifying Free Zone Person
A member of a multinational enterprise group with consolidated group revenue exceeding AED 3.15 billion
A Non-Resident Person
A person whose revenue exceeded AED 3 million in the current or any previous relevant Tax Period
Free-Zone Companies
A company is not automatically excluded merely because it is incorporated in a UAE free zone. The exclusion applies specifically where the company is treated as a Qualifying Free Zone Person. A Qualifying Free Zone Person benefits from the separate Free Zone Corporate Tax regime and cannot claim Small Business Relief. A Free Zone Person that has elected to be subject to the standard Corporate Tax rules, or that is otherwise not treated as a Qualifying Free Zone Person, may potentially qualify for Small Business Relief if all applicable conditions are met. The effect of leaving or losing Qualifying Free Zone Person status should be assessed carefully because it can extend beyond the immediate Tax Period.
Multinational Enterprise Groups
A UAE entity forming part of a large multinational enterprise group cannot claim Small Business Relief where the group’s consolidated revenue exceeds AED 3.15 billion. This restriction prevents entities within large international groups from accessing a relief intended for genuinely small businesses and start-ups.
How Is the AED 3 Million Revenue Threshold Calculated?
For Small Business Relief, revenue means the gross amount of income earned during the relevant Tax Period. It is determined using the applicable accounting standards accepted in the UAE. Revenue is calculated before deducting business expenses. Costs such as salaries, rent, professional fees, utilities, marketing expenses and the cost of goods sold do not reduce revenue for the purpose of the AED 3 million threshold. For example:
Revenue: AED 2,900,000
Business expenses: AED 2,100,000
Accounting profit: AED 800,000
The business remains within the revenue threshold because the relevant figure is AED 2.9 million, not the AED 800,000 profit.
Revenue Is Not Always the Same as Bank Receipts
The amount deposited into a business bank account should not automatically be treated as revenue. Capital contributions, shareholder loans and commercial borrowings may increase the bank balance without constituting business revenue. Conversely, revenue recognised under the applicable accounting method may be included before the customer has paid the corresponding invoice. The business should therefore rely on properly prepared accounting records rather than adding together bank deposits or using the amount shown on VAT returns without reconciliation.
Where a Taxable Person conducts several business activities, the revenue attributable to that person must be considered collectively. Activities should not be assessed separately simply because they operate under different brands, branches or income streams.
How Is Small Business Relief Claimed?
Small Business Relief is claimed through the Corporate Tax Return. It is not granted automatically and does not require a separate application before the return is filed. An eligible Taxable Person should:
Register for Corporate Tax where registration is required
Maintain accounting records sufficient to calculate and support revenue
Confirm that the eligibility conditions are satisfied
File the Corporate Tax Return through EmaraTax
Elect Small Business Relief within the return
Retain the records supporting the election
The election must be made separately for each qualifying Tax Period. Claiming the relief in one year does not automatically apply it to the following year.
The Tax Return Is Still Required
An eligible business must still submit a Corporate Tax Return even when the election results in no Corporate Tax being payable. Businesses claiming the relief benefit from a simplified return, but they are not exempt from filing.
The return must generally be submitted within nine months from the end of the relevant Tax Period. For example, where a business has a financial year ending on 31 December 2027, its Corporate Tax Return would generally be due by 30 September 2028.
The 31 December 2029 extension is the final date by which a qualifying Tax Period may end. It is not the filing deadline for every business claiming the relief. Each return remains subject to the deadline calculated from the end of its own Tax Period.
Benefits and Consequences of Claiming the Relief
Small Business Relief can reduce both the Corporate Tax liability and the administrative burden for an eligible business. The principal benefits include:
The business is treated as having no Taxable Income for the relevant Tax Period
No Corporate Tax is payable for that period
A simplified Corporate Tax Return may be filed
A detailed Taxable Income calculation is generally not required
Simplified record-keeping provisions may apply
Financial Statements may be prepared using the cash basis of accounting where the applicable conditions are satisfied
Transfer pricing documentation requirements are reduced
However, the election also affects the availability of other Corporate Tax provisions.
Tax Losses
A loss arising during a Tax Period in which Small Business Relief is elected cannot be declared as a Tax Loss or carried forward to future periods. Tax Losses created in an earlier period in which the relief was not claimed cannot be used during the relief period. They may remain available for later Tax Periods, subject to the applicable conditions. A loss-making business should therefore assess whether claiming the relief is beneficial. Choosing not to elect may allow the business to declare and preserve a Tax Loss for future use.
Net Interest Expenditure
Net Interest Expenditure incurred during a Tax Period covered by Small Business Relief cannot be carried forward. Previously carried-forward Net Interest Expenditure cannot be used during a relief period, although it may remain available for a later Tax Period in which the relief is not elected, subject to the applicable rules.
Transfer Pricing
A business claiming Small Business Relief is generally not required to maintain the transfer pricing documentation that would otherwise apply. However, transactions with Related Parties and Connected Persons must still satisfy the arm’s length principle. Prices and terms should reflect those that would have been agreed between independent parties.
Foreign Tax Credits
Where Small Business Relief results in no UAE Corporate Tax being payable, a Foreign Tax Credit cannot be claimed for foreign tax paid on the relevant income.
The election should therefore be assessed in the context of the business’s overall position. A relief that eliminates current Corporate Tax may not always produce the best longer-term result where the business has losses, significant interest expenditure or foreign taxes.
Record-Keeping Obligations Continue
Claiming Small Business Relief does not remove the obligation to maintain complete and reliable business records. The business must be able to demonstrate that its revenue remained within the AED 3 million threshold during the relevant Tax Period and all previous relevant Tax Periods. Supporting records may include:
Financial Statements and accounting reports
Sales and purchase ledgers
Customer and supplier invoices
Bank statements and reconciliations
Contracts and commercial agreements
Loan and financing documents
Records of assets and disposals
Records of liabilities
Details of shares or ownership interests
Documentation supporting Related Party and Connected Person transactions
Evidence explaining amounts received that were not treated as revenue
Records and supporting documents must generally be retained for seven years following the end of the Tax Period to which they relate. The FTA may request evidence to verify the figures reported and confirm that the business was eligible for the relief. If the records do not adequately support the revenue calculation, the election may be challenged and administrative penalties may apply.
A simplified Corporate Tax Return should therefore not be interpreted as a minimal accounting requirement. Accurate and consistent records remain necessary throughout the period in which the relief is claimed.
Artificial Separation of a Business
The AED 3 million threshold applies to the genuine commercial position of the business. It cannot be preserved by artificially dividing one business or activity among several persons or entities. Where the FTA determines that:
A business or business activity has been artificially separated
The combined revenue exceeds AED 3 million in a Tax Period
One or more of the persons involved elected for Small Business Relief
the arrangement may be treated as an attempt to obtain a Corporate Tax advantage under the general anti-abuse rule.
The FTA may consider whether the separation has a valid commercial purpose and whether the persons conduct substantially the same business or activity. Relevant factors may include:
Common ownership or control
Shared management and employees
Connected financial arrangements
Common premises, systems or resources
The same or closely connected customers and suppliers
Interdependent operations
The timing and commercial purpose of the restructuring
Operating through multiple companies or holding several licences is not automatically artificial. Businesses may use separate entities for legitimate commercial, operational, regulatory or risk-management reasons. However, the structure should reflect genuine economic and organisational separation. Creating additional entities, branches or licences primarily to keep each person’s revenue below AED 3 million may result in the relief being denied and the Corporate Tax position being reassessed.
What Does the Extension to 2029 Change?
Ministerial Decision No. 131 of 2026 extends the availability of Small Business Relief by three years. The previous final date was 31 December 2026. The relief may now be elected for qualifying Tax Periods ending on or before 31 December 2029. The extension does not:
Increase the AED 3 million revenue threshold
Make the relief automatic
Reinstate eligibility after the threshold has previously been exceeded
Remove Corporate Tax registration or filing obligations
Convert the relief into a permanent exemption
Calendar-Year Businesses
A business using the calendar year as its financial year may potentially claim the relief for the Tax Periods ending:
31 December 2027
31 December 2028
31 December 2029
Eligibility must be tested separately for each period.
Businesses With a Different Financial Year
The end date of the Tax Period determines whether the extended relief is available. For example:
A Tax Period ending on 30 September 2029 may qualify
A Tax Period ending on 31 March 2030 will fall outside the current relief period
A Tax Period beginning in 2029 but ending in 2030 will not qualify under the present extension
Businesses with a non-calendar financial year should therefore check the exact start and end dates of their Tax Period rather than assuming that every financial period beginning before the end of 2029 is covered.
The Election Should Be Assessed for Each Tax Period
Small Business Relief is optional. An eligible business may choose not to elect if the standard Corporate Tax treatment produces a more appropriate outcome. Before making the election, the business should consider:
Whether it generated an accounting or Tax Loss during the period
Whether preserving that loss for future use would be beneficial
Whether it has carried-forward Tax Losses or Net Interest Expenditure
Whether foreign tax was paid on income included in the period
Whether another exemption, deduction or relief may be relevant
Whether Related Party transactions have been priced on an arm’s length basis
Whether revenue is approaching or likely to exceed the AED 3 million threshold
Whether the business can adequately support its revenue calculation
A profitable business with limited complexity may obtain a clear benefit from electing for the relief. By contrast, a loss-making business may prefer to complete the full Taxable Income calculation and preserve the resulting Tax Loss for possible use in future periods. A business with foreign-source income may also need to consider whether making the election would cause an available Foreign Tax Credit to be forfeited.
The appropriate decision depends on the business’s current figures and its expected future position. Eligibility should therefore be followed by a documented assessment rather than an automatic election.
Common Misunderstandings About the Extension
The Threshold Is AED 3 Million, Not AED 817,000
Some international headlines describe the threshold as approximately USD 817,000. This is the US dollar equivalent of AED 3 million. The legal threshold is denominated in UAE dirhams.
The Threshold Refers to Revenue, Not Profit
A business with a small profit or an accounting loss may still exceed the threshold if its gross revenue is more than AED 3 million.
The Relief Is Not Automatic
An eligible business must elect for Small Business Relief through its Corporate Tax Return for each qualifying Tax Period.
No Tax Payable Does Not Mean No Tax Return
A business claiming the relief must still register for Corporate Tax where required, file its return and retain supporting records.
The Extension Does Not Restore Lost Eligibility
If revenue exceeded AED 3 million in a previous relevant Tax Period, a later reduction below the threshold does not make the business eligible again.
Free-Zone Incorporation Does Not Determine Eligibility by Itself
A Qualifying Free Zone Person cannot claim Small Business Relief. A Free Zone Person that is subject to the standard Corporate Tax regime may potentially qualify if all conditions are met.
The Relief Does Not Extend Every Filing Deadline to 2029
The date of 31 December 2029 determines the final Tax Periods that may qualify. Each business must still file its return within the deadline calculated from the end of its own Tax Period.
How NUR Advisors Group Can Help
Small Business Relief should be considered within the wider accounting, tax and corporate position of the business. Eligibility depends on accurate records, complete revenue history and a clear understanding of the company’s structure and activities.
NUR Advisors Group can assist with:
Reviewing the company’s corporate structure and licensing position
Coordinating Corporate Tax registration and compliance requirements
Organising bookkeeping and accounting records
Monitoring revenue against the AED 3 million threshold
Identifying gaps or inconsistencies in historical records
Maintaining a calendar of return-filing and renewal deadlines
Coordinating the preparation of financial information required for the Corporate Tax Return
Working with accounting and tax professionals to assess the available election
Supporting responses to document requests and compliance reviews
Coordinating specialist tax advice for complex structures or transactions
Our role is to ensure that the business’s corporate records, accounting information and compliance processes work together. Where specialist tax interpretation is required, we coordinate with the appropriate qualified professional before the return is filed.
For support with Corporate Tax compliance, accounting coordination or a review of your UAE business structure, contact NUR Advisors Group.
Disclaimer
The information contained in this article is provided by NUR Advisors Group for general informational purposes only. It does not constitute legal, tax, accounting, financial, immigration, employment or other professional advice and should not be relied upon as a substitute for advice tailored to your specific circumstances.
Although reasonable efforts are made to ensure that the information is accurate at the date of publication, laws, regulations, procedures, fees and government requirements may change without notice. NUR Advisors Group makes no representation or warranty regarding the completeness, accuracy or continued validity of the information and, to the fullest extent permitted by law, accepts no liability for any action taken or decision made in reliance upon it.
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