UAE Small Business Relief Extended to 2029: AED 3 Million Corporate Tax Guide

UAE Corporate Tax Update · August 2026

UAE Small Business Relief Extended to 2029: AED 3 Million Corporate Tax Guide

The UAE has extended Small Business Relief for Corporate Tax to Tax Periods ending on or before 31 December 2029. The previous end date was 31 December 2026.

The extension was announced by the Ministry of Finance on 7 August 2026 following the issuance of Ministerial Decision No. 131 of 2026, which amends Ministerial Decision No. 73 of 2023.

The important point for UAE small businesses is that the AED 3 million Revenue threshold has not changed. What has changed is how long eligible businesses can continue to elect for the relief.

Small Business Relief is not automatic. An eligible business must register for Corporate Tax, file its Corporate Tax Return and elect for the relief for the relevant Tax Period.

UAE Small Business Relief 2029: Key Points

What Changed Under Ministerial Decision No. 131 of 2026?

Small Business Relief was originally available for eligible Tax Periods beginning on or after 1 June 2023 and ending on or before 31 December 2026.

Ministerial Decision No. 131 of 2026 extends that end date. The AED 3 million threshold now continues to apply to relevant Tax Periods ending on or before 31 December 2029.

The amendment did not replace the underlying Small Business Relief system. The existing eligibility conditions, Revenue test and exclusions continue to matter.

Is Small Business Relief a 0% Corporate Tax Rate?

It is common to describe Small Business Relief as giving eligible SMEs “0% Corporate Tax”, but that is not the precise legal treatment.

When an eligible Resident Person elects for Small Business Relief, it is treated as having no Taxable Income for that Tax Period. As Corporate Tax is charged on Taxable Income, the business does not have Corporate Tax to pay for that period under the relief.

This is different from simply applying a special 0% Corporate Tax rate to the company’s normal Taxable Income.

Who Can Claim Small Business Relief in the UAE?

An eligible Resident Person can elect for Small Business Relief where the applicable conditions are met.

How Does the AED 3 Million Revenue Test Work?

The AED 3 million Small Business Relief threshold is based on Revenue, not profit.

Revenue is broadly the gross amount of income derived during the Tax Period under the applicable accounting rules. A business cannot reduce its Revenue for the SBR test by deducting salaries, rent, inventory costs, advertising, professional fees or other operating expenses.

A business with AED 3.1 million of Revenue does not qualify simply because its profit is small or because it made an accounting loss.

What Counts as Revenue for Small Business Relief?

One of the easiest mistakes is to treat Revenue as only the value of normal customer sales.

The FTA’s Small Business Relief guidance explains that Revenue is the gross amount of income derived during the Tax Period. Depending on the circumstances, this can include income other than normal sales of goods and services.

For example, the FTA guidance explains that proceeds from selling a business asset can form part of Revenue and provides an example where dividend income is included when determining total Revenue for the SBR threshold.

Businesses approaching AED 3 million should therefore review the complete Revenue calculation instead of monitoring sales invoices alone.

What Happens if Revenue Exceeds AED 3 Million?

This is one of the most important Small Business Relief rules.

Once Revenue exceeds the AED 3 million threshold in a relevant Tax Period, the business cannot regain Small Business Relief in a later relevant Tax Period simply because its Revenue falls below AED 3 million again.

This is because eligibility looks at both the current Tax Period and previous relevant Tax Periods. The FTA specifically illustrates this rule with a business whose Revenue falls back below AED 3 million after exceeding the threshold in an earlier period but remains ineligible for SBR.

Who Cannot Claim Small Business Relief?

Meeting the AED 3 million Revenue test does not automatically make every business eligible.

Qualifying Free Zone Persons

A Qualifying Free Zone Person cannot elect for Small Business Relief. This does not mean that every Free Zone company is automatically excluded. A Free Zone Person that is not a Qualifying Free Zone Person may potentially qualify for SBR if it is an eligible Resident Person and satisfies the other requirements.

Certain Multinational Enterprise Group Members

A constituent company of a Multinational Enterprise Group with consolidated group Revenue above AED 3.15 billion cannot elect for Small Business Relief even where the UAE entity itself has Revenue below AED 3 million.

Can a UAE Free Zone Company Claim Small Business Relief?

A Free Zone company should not assume that Free Zone status alone either qualifies or disqualifies it from Small Business Relief.

Free Zone Persons are generally Resident Persons for Corporate Tax purposes and can potentially fall within SBR. The specific exclusion applies to a Qualifying Free Zone Person.

A Free Zone business should therefore establish its Corporate Tax status first. The rules for a Qualifying Free Zone Person and Small Business Relief are different regimes and should not be treated as interchangeable simply because both can produce no Corporate Tax payable on particular income.

Can Natural Persons and Sole Establishments Claim SBR?

Small Business Relief is not limited to companies. An eligible natural person who is a Resident Person for Corporate Tax purposes can also elect for the relief.

A natural person becomes subject to UAE Corporate Tax where they conduct a Business or Business Activity in the UAE and their total Turnover from those activities exceeds AED 1 million in the calendar year.

Wages, Personal Investment Income and Real Estate Investment Income that falls within the specified exclusions are not treated as Business or Business Activity for this AED 1 million test. Where a natural person is within Corporate Tax and meets the SBR conditions, Small Business Relief may then become relevant.

Can a New Company Established in 2026 Claim Small Business Relief?

Yes, a newly established company can potentially qualify if it is an eligible Resident Person, its relevant Tax Period falls within the SBR window and its Revenue does not exceed AED 3 million.

There is an important point for a company’s first Financial Year. Under UAE Corporate Tax rules, a first Tax Period can in some cases be shorter or longer than 12 months, including a period between six and 18 months for companies governed by the applicable Commercial Companies rules.

The FTA has clarified that the AED 3 million Small Business Relief threshold is not prorated merely because the first Tax Period is shorter or longer than 12 months.

How to Claim Small Business Relief Through EmaraTax

Small Business Relief is an election made through the Corporate Tax Return. Revenue below AED 3 million does not automatically activate the relief.

Small Business Relief Does Not Remove the Corporate Tax Return

A business that qualifies for SBR still remains a Taxable Person and must continue meeting its Corporate Tax compliance obligations.

On 3 August 2026, the Federal Tax Authority again confirmed that eligible businesses must register for Corporate Tax, submit a simplified Corporate Tax Return and maintain relevant supporting records.

SBR simplifies the return. It does not eliminate the return.

Does Small Business Relief Mean You Can Stop Bookkeeping?

No. A business still needs records that support the information reported to the FTA and demonstrate that its Revenue remained within the SBR threshold.

Depending on the business, supporting records can include:

• bank statements;
• sales ledgers;
• customer invoices and records of daily earnings;
• order records and delivery notes;
• accounting records supporting Revenue; and
• other relevant business correspondence and supporting documents.

Small Business Relief reduces compliance work, but it does not turn an unrecorded or unsupported Revenue figure into an acceptable Corporate Tax position.

Do SBR Businesses Need Full IFRS Financial Statements?

Businesses should be careful with claims that Small Business Relief means that no financial records or financial statements are required.

The FTA’s SBR guidance provides simplified accounting treatment and explains that a Person with Revenue not exceeding AED 3 million can use the Cash Basis of Accounting, subject to the applicable Corporate Tax accounting rules.

Separate accounting, audit or financial-statement obligations can still arise under another law, a Free Zone authority, a licensing authority, financing arrangements or other regulatory requirements. SBR should therefore not be described as cancelling every financial reporting obligation of the business.

Does Small Business Relief Remove Transfer Pricing Requirements?

This needs to be divided into two separate requirements.

A business that elects for Small Business Relief must still comply with the Arm’s Length Principle when dealing with Related Parties and Connected Persons.

However, the FTA’s Small Business Relief guidance specifically states that the normal transfer pricing documentation rules do not apply for a Tax Period in which the business elects for SBR. This includes the normal requirement covered by the guidance to maintain a master file and local file.

The correct position is therefore: arm’s-length pricing still applies, but the normal SBR-period transfer pricing documentation requirement does not.

What Happens to Tax Losses When You Elect for SBR?

Small Business Relief can reduce the immediate Corporate Tax burden, but businesses should also understand what happens to Tax Losses.

Where SBR is elected for a Tax Period, the Tax Loss provisions do not apply for that period. The business therefore cannot create, use or transfer a Tax Loss for that SBR Tax Period.

Tax Losses brought forward from an earlier Tax Period in which SBR was not elected can generally remain carried forward for potential use in a later period where the relevant conditions are met and SBR is not elected.

Can You Split a Business to Stay Below AED 3 Million?

Businesses should not artificially divide one business or business activity between separate entities simply to keep each entity’s Revenue below the SBR threshold.

The Small Business Relief rules specifically address artificial separation. Where the FTA establishes that a business has been artificially separated and the combined Revenue exceeds AED 3 million, the arrangement can be addressed under the Corporate Tax General Anti-Abuse Rule.

The consequences can include loss of the relief, Corporate Tax that would otherwise have been payable and applicable penalties.

SBR Does Not Change Your Corporate Tax Filing Deadline

Extending Small Business Relief to 2029 does not extend the normal deadline for submitting Corporate Tax Returns.

A business whose Tax Period ended on 31 December 2025 generally has until 30 September 2026 to submit its Corporate Tax Return.

The normal filing deadline is generally nine months after the end of the relevant Tax Period. A business claiming SBR should therefore make the election within its Corporate Tax Return by its own applicable filing deadline.

Do You Still Have to Register for Corporate Tax?

Yes, where the Person is required to register for Corporate Tax. An eligible Taxable Person cannot simply use Revenue below AED 3 million as a reason not to register.

The current administrative penalty for failing to submit a Corporate Tax registration application within the applicable timeframe is AED 10,000.

Registration deadlines depend on the type of Taxable Person and when the registration obligation arose. For example, a UAE Resident juridical person incorporated on or after 1 March 2024 is generally required to apply for Corporate Tax registration within three months from its incorporation, establishment or recognition.

The FTA also operates a late-registration penalty waiver initiative where the prescribed conditions are met, including submission of the first Tax Return within seven months from the end of the first Tax Period.

How Long Must SBR Records Be Kept?

Businesses must generally retain Corporate Tax records and documents for seven years following the end of the Tax Period to which those records relate.

This matters particularly for SBR because the business must be able to demonstrate that its Revenue remained within the AED 3 million threshold for the relevant periods if the FTA later reviews the election.

What UAE SMEs Should Do After the 2029 Extension

The extension gives eligible small businesses a longer period in which SBR can be used, but companies should continue checking their position for every Tax Period.

• monitor Revenue against the AED 3 million threshold throughout the year;
• review previous relevant Tax Periods before assuming the current period qualifies;
• confirm whether a Free Zone business is a Qualifying Free Zone Person;
• maintain accounting records that clearly support Revenue;
• review Related Party and Connected Person transactions under the Arm’s Length Principle;
• make the SBR election through the Corporate Tax Return where eligible; and
• file the Corporate Tax Return within the normal nine-month deadline.

Businesses close to AED 3 million should pay particular attention to the Revenue calculation because exceeding the threshold can affect access to SBR in later relevant Tax Periods as well.

What Happens After 31 December 2029?

Under the rules currently in force, Small Business Relief applies to eligible Tax Periods ending on or before 31 December 2029.

Unless the legislation is amended again, a Tax Period ending after that date would fall outside the current SBR window. Businesses should therefore treat 31 December 2029 as the current statutory end date rather than assume that another extension will automatically follow.

How Credora Can Help With Small Business Relief in the UAE

Small Business Relief can significantly simplify UAE Corporate Tax compliance for an eligible business, but eligibility should be assessed based on the company’s Revenue, current and previous relevant Tax Periods, Free Zone position and wider Corporate Tax profile.

Under the current rules, Small Business Relief may apply to eligible Tax Periods ending on or before 31 December 2029, subject to the applicable conditions and Revenue threshold.

Credora Consultancy LLC can review the company’s Small Business Relief eligibility, check whether Revenue is AED 3 million or less in the current and previous relevant Tax Periods, assess the company’s Free Zone position, prepare the Corporate Tax position and support the Small Business Relief election and simplified Corporate Tax return through EmaraTax.

Credora Consultancy LLC’s team includes Mr. Chirag Gupta, an FTA Registered Tax Agent – TAAN 20056628, whose registration can be verified through the UAE Federal Tax Authority’s Registered Tax Agents directory . Credora supports mainland and Free Zone businesses with UAE Corporate Tax registration, return preparation, accounting and FTA-related tax matters.

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