UAE Small Business Relief Extended to 2029: Eligibility and How to Claim

UAE Small Business Relief has been extended, giving eligible businesses and natural persons more time to benefit from simplified Corporate Tax treatment.

Under Ministerial Decision No. 131 of 2026, Small Business Relief may now apply to eligible Tax Periods ending on or before 31 December 2029. The previous final eligible Tax Period end date was 31 December 2026.

The Revenue threshold has not changed. To qualify, a Taxable Person must be a Resident Person for UAE Corporate Tax purposes and must have Revenue of no more than AED 3 million in the relevant Tax Period and all applicable previous Tax Periods.

Where a valid election is made, the eligible person is treated as having no Taxable Income for that Tax Period and, therefore, does not need to calculate or pay Corporate Tax for the period.

However, being eligible does not always mean that making the election is the best tax decision. Tax Losses, finance costs, other available reliefs and the business’s future plans should all be considered before filing.

Not sure whether your business is eligible—or whether you should make the election?

Creation Business Consultants can review your Revenue history, Corporate Tax status and available reliefs before your return is filed.

UAE SMALL BUSINESS RELIEF AT A GLANCE

WHAT CHANGED IN 2026?

Ministerial Decision No. 131 of 2026 amended Clause 2 of Article 2 of Ministerial Decision No. 73 of 2023.

The amendment extends the period during which the AED 3 million Revenue threshold applies. It now covers subsequent Tax Periods ending on or before 31 December 2029.

No increase was made to the Revenue threshold, and the main eligibility and exclusion rules remain in place.

The extension may allow eligible businesses to benefit for additional Tax Periods. Each business must still check its Revenue history and Corporate Tax status before making an election.

WHO CAN CLAIM UAE SMALL BUSINESS RELIEF?

Small Business Relief may be available where all the following conditions are met:

• The person is a Taxable Person for UAE Corporate Tax purposes.
• The person is a UAE Resident Person.
• Revenue does not exceed AED 3 million in the relevant Tax Period.
• Revenue did not exceed AED 3 million in any applicable previous Tax Period.
• The person is not a Qualifying Free Zone Person.
• The person is not an excluded member of a Multinational Enterprise Group.
• A valid election is made in the Corporate Tax Return for the relevant Tax Period.

The relief can potentially apply to UAE companies and natural persons conducting a Business or Business Activity, provided the applicable Corporate Tax conditions are met.

The Threshold Is Based On Revenue, Not Profit

One of the most common areas of confusion is the AED 3 million threshold itself.

The threshold is based on Revenue. It is not based on profit, Taxable Income, cash received or the VAT registration threshold.

For example:

• A business with Revenue of AED 2.8 million and a profit of AED 1 million may potentially qualify.
• A business with Revenue of AED 3.2 million would not qualify, even if its profit were considerably lower.

Revenue is generally the gross amount of income derived during the Tax Period. It must be determined using the applicable accounting standards accepted in the UAE.

The AED 3 million Revenue threshold is not adjusted in proportion to the length of a Tax Period, including where the Tax Period is shorter or longer than 12 months.

Depending on the circumstances, a business with Revenue not exceeding AED 3 million may also be permitted to prepare its Financial Statements using the cash basis of accounting.

Previous Tax Periods Must Also Be Reviewed

Eligibility is not determined by looking only at the current Tax Period.

Revenue must not have exceeded AED 3 million in the current Tax Period or any applicable previous Tax Period beginning on or after 1 June 2023.

If Revenue exceeded AED 3 million in one of those periods, the business cannot elect for Small Business Relief in a later eligible period under the current rules, even if its Revenue subsequently falls below the threshold.

This makes an accurate review of earlier Financial Statements and Revenue records essential.

Do you know whether your business remained within the threshold in every relevant Tax Period?

Our Corporate Tax specialists can review current and previous Revenue, identify any exclusions and confirm whether an election remains available.

How Does Small Business Relief Apply To Natural Persons?

A natural person conducting a Business or Business Activity in the UAE may potentially elect for Small Business Relief, but two separate thresholds need to be considered.

A natural person is generally only required to register for Corporate Tax where the total Turnover from UAE Businesses or Business Activities exceeds AED 1 million in a Gregorian calendar year.

Where a natural person’s applicable Turnover does not exceed AED 1 million, the person would generally not be subject to Corporate Tax in respect of those Businesses or Business Activities and would not ordinarily need to elect for Small Business Relief.

The AED 1 million Turnover threshold is separate from the AED 3 million Revenue threshold used to determine eligibility for Small Business Relief.

A natural person with multiple Businesses or Business Activities must consider the combined position. The thresholds should not be applied separately to each activity in an attempt to remain below the relevant amount.

Wages, personal investment income and real estate investment income are generally outside the scope of Corporate Tax for a natural person where the relevant conditions are met.

Can A Free Zone Company Claim Small Business Relief?

A Qualifying Free Zone Person cannot elect for Small Business Relief.

This does not mean that every Free Zone company is automatically excluded. The company’s actual Corporate Tax status must be assessed.

A Free Zone Person that is not, or has ceased to be, a Qualifying Free Zone Person may potentially qualify for Small Business Relief if it meets the Revenue threshold and all other conditions.

Free Zone businesses should therefore avoid making assumptions based solely on where the company is incorporated.

WHO CANNOT CLAIM SMALL BUSINESS RELIEF?

Small Business Relief is not available to:

• A Qualifying Free Zone Person.
• A Constituent Company of a Multinational Enterprise Group within the applicable UAE Country-by-Country Reporting framework.

The MNE exclusion generally concerns groups with consolidated group Revenue of AED 3.15 billion or more in the relevant preceding Financial Year.

HOW TO CLAIM SMALL BUSINESS RELIEF

Small Business Relief is not applied automatically simply because Revenue is below AED 3 million.

The election is made through the Corporate Tax Return for the relevant Tax Period. A separate advance application or FTA pre-approval is not normally required.

Before making the election, the business should:

1. Confirm that it is a Taxable Person and a UAE Resident Person.
2. Review Revenue for the current and all applicable previous Tax Periods.
3. Confirm that Revenue has not exceeded AED 3 million in any relevant period.
4. Check whether any exclusion applies, including Qualifying Free Zone Person or MNE Group status.
5. Review available Tax Losses, Net Interest Expenditure, exemptions, deductions and other reliefs.
6. Register for Corporate Tax and obtain a Tax Registration Number where required.
7. Make the election in the Corporate Tax Return for the relevant Tax Period.
8. File the return by the applicable deadline, which is generally nine months from the end of the Tax Period.

A fresh election is required for every Tax Period in which the business wishes to claim the relief.

Does The Business Still Need To File A Corporate Tax Return?

Yes.

An eligible business must still register for Corporate Tax where required and submit a Corporate Tax Return. Where Small Business Relief is elected, the business may complete a simplified return.

The election does not remove the need to maintain proper accounting records or provide evidence supporting the Revenue position reported in the return.

Corporate Tax records and supporting documents must generally be retained for seven years following the end of the relevant Tax Period.

WHAT HAPPENS WHEN SMALL BUSINESS RELIEF IS ELECTED?

Where a valid election is made, the Taxable Person is treated as having no Taxable Income for that Tax Period.

This can reduce both the immediate tax liability and the level of Corporate Tax calculation required. However, the election also affects the use of other Corporate Tax exemptions, reliefs and deductions.

What Happens To Existing Tax Losses?

A Tax Loss does not arise in a Tax Period for which Small Business Relief is elected.

Tax Losses carried forward from earlier periods cannot be used or transferred during a relief period. They may, however, remain available for use or transfer in a later Tax Period in which Small Business Relief is not elected, subject to the normal Corporate Tax conditions.

A business with brought-forward Tax Losses should therefore compare the value of claiming Small Business Relief against the value of preserving and using those losses.

What Happens To Net Interest Expenditure?

Net Interest Expenditure incurred during a Small Business Relief period cannot be carried forward to a later Tax Period.

Eligible Net Interest Expenditure carried forward from an earlier period in which Small Business Relief was not elected may remain available for a later non-relief period, subject to the applicable rules.

Businesses with loans, shareholder financing or significant finance costs should review this position carefully before making an election.

Do transfer pricing rules still apply?

Yes.

A business electing for Small Business Relief must still comply with the arm’s length principle when dealing with Related Parties and Connected Persons.

The usual transfer pricing documentation requirements are simplified for the relief period. However, the business should retain sufficient records to demonstrate that relevant transactions were conducted on an arm’s length basis.

This can be particularly important for owner-managed businesses where salaries, management fees, loans, rent or other payments are made to owners, directors or related companies.

SHOULD EVERY ELIGIBLE BUSINESS CLAIM THE RELIEF?

Not necessarily.

For a small, profitable business with no significant Tax Losses, finance costs or competing reliefs, Small Business Relief may provide a straightforward tax and compliance benefit.

The decision may be less clear where the business:

• Is currently loss-making.
• Has brought-forward Tax Losses.
• Has significant loan or finance costs.
• May qualify for another exemption, deduction or relief.
• Expects Revenue to exceed AED 3 million.
• Is part of a wider group or related-party structure.
• Is considering a restructuring, sale or future investment.

In these situations, the Corporate Tax outcome should be calculated both with and without the election before the return is filed.

Being eligible to claim and deciding whether to claim are two different questions.

Before making the election, understand what your business may be giving up.

Creation Business Consultants can model the Corporate Tax position with and without Small Business Relief, helping you make an informed decision before filing.

ARTIFICIAL SEPARATION OF A BUSINESS

The AED 3 million threshold must be applied to genuine commercial arrangements.

Artificially dividing a Business or Business Activity between separate persons or entities to keep each one below the threshold may be treated as an arrangement designed to obtain a Corporate Tax advantage.

When considering whether a business has been artificially separated, the Federal Tax Authority may examine:

• Whether there is a genuine commercial purpose.
• Whether the persons conduct substantially the same Business or Business Activity.
• Financial links between the persons.
• Economic links between the persons.
• Organisational and management links.

Businesses operating through several connected entities should review the commercial reasons for the structure and ensure that each entity has a genuine purpose.

COMMON SMALL BUSINESS RELIEF MISTAKES

Businesses should avoid:

• Treating AED 3 million as a profit threshold instead of a Revenue threshold.
• Assuming the 2029 extension increased the threshold.
• Looking only at the current Tax Period.
• Assuming the relief is applied automatically.
• Failing to register or file a Corporate Tax Return.
• Electing without reviewing existing Tax Losses or finance costs.
• Assuming every Free Zone company is automatically included or excluded.
• Ignoring Related Party and Connected Person transactions.
• Artificially separating activities to remain below the threshold.
• Failing to retain sufficient accounting and Revenue records.

FREQUENTLY ASKED QUESTIONS

Has UAE Small Business Relief been extended?

Yes. Subject to the applicable conditions, Small Business Relief may now apply to eligible Tax Periods ending on or before 31 December 2029.

Has the AED 3 million Revenue threshold increased?

No. The Revenue threshold remains AED 3 million.

Is Small Business Relief automatic?

No. The business must meet all eligibility conditions and make an election in its Corporate Tax Return for each relevant Tax Period.

Does a business still need to register for Corporate Tax?

Yes, where the Corporate Tax registration requirements apply. Small Business Relief is claimed through the Corporate Tax Return; it is not a substitute for registration.

What happens if Revenue exceeded AED 3 million in a previous Tax Period?

If Revenue exceeded AED 3 million in the current or any applicable previous Tax Period, the business cannot elect for Small Business Relief in a later eligible period under the current rules.

Can Tax Losses be used while claiming Small Business Relief?

No. Earlier Tax Losses cannot be used or transferred during a relief period. Subject to the normal conditions, they may remain available for a later period in which Small Business Relief is not elected.

Is Small Business Relief always the best option?

No. Businesses with Tax Losses, significant finance costs or other available reliefs should compare the Corporate Tax position with and without the election before filing.

KEY TAKEAWAY

The extension to 31 December 2029 is welcome news for eligible smaller businesses in the UAE, but it has not changed the main qualifying conditions.

The Revenue threshold remains AED 3 million. Current and previous Tax Periods must be reviewed, exclusions must be checked and the election must be made through the Corporate Tax Return.

For many businesses, the real question is not simply, “Can we claim?” It is, “Should we claim?”

HOW CREATION BUSINESS CONSULTANTS CAN HELP

Creation Business Consultants can support your business with:

• A review of current and previous Revenue.
• Small Business Relief eligibility assessment.
• Free Zone and Qualifying Free Zone Person status review.
• Review of Tax Losses and finance costs.
• Modelling of the Corporate Tax position with and without the election.
• Corporate Tax registration.
• Corporate Tax Return preparation and filing.
• Supporting records and compliance review.

Confirm your eligibility before filing your Corporate Tax Return.

Speak with our Corporate Tax specialists for a practical review of your business and the potential effect of making the Small Business Relief election.

Scott Cairns,
Managing Director