Last reviewed: 26 July 2026
Small Business Relief can reduce the Corporate Tax compliance burden for eligible Resident Persons. Where the relief is validly elected, the person is treated as having no taxable income for the relevant Tax Period.
The relief is not automatic, it is not the same as the 0% Corporate Tax band and it does not remove the obligations to register, file a return or maintain records. It can also produce an unfavourable result for a loss-making business because a loss arising in an elected period cannot be carried forward.
For the overall system, start with the UAE Corporate Tax Guide 2026.
The Quick Answer
- The AED 3 million test is based on Revenue, not profit or taxable income.
- The relief must be elected in the Corporate Tax Return for each Tax Period.
- A Qualifying Free Zone Person cannot elect for the relief.
- A member of an in-scope multinational group cannot elect for it.
- The person must still register, file and retain records.
- A Tax Loss arising during an elected period cannot be carried forward.
What Does Small Business Relief Do?
Where the election is valid, the Taxable Person is treated as not having derived any taxable income during that Tax Period. This generally means there is no Corporate Tax payable for that period under the ordinary taxable-income calculation.
Because the person is treated as having no taxable income, the usual exemptions, reliefs and deductions are not applied in that period. The election is therefore a simplified treatment, not a deduction from tax and not a permanent exemption from the Corporate Tax regime.
Who Can Elect?
The election is available to an eligible Resident Person, which can include:
- A UAE resident juridical person, such as an eligible mainland company.
- A resident natural person who is already subject to Corporate Tax.
- Another Resident Person that satisfies the statutory conditions.
The person must be a Taxable Person. A person outside the Corporate Tax regime does not need to elect for relief merely because Revenue is below AED 3 million.
See UAE Corporate Tax for natural persons for the AED 1 million test.
Who Cannot Elect?
Qualifying Free Zone Persons
A Qualifying Free Zone Person cannot elect for Small Business Relief. A Free Zone company that does not qualify as a Qualifying Free Zone Person may need a separate assessment of whether it is an eligible Resident Person under the ordinary rules.
Read UAE Corporate Tax for Free Zone companies.
Members of large multinational groups
The relief is not available to a member of a multinational enterprise group whose consolidated group Revenue exceeds AED 3.15 billion, subject to the definition in the applicable decision.
Persons that fail the Revenue history test
Once Revenue has exceeded AED 3 million in any previous relevant Tax Period, the relief is unavailable for a later period under the current rules, even if Revenue later falls below AED 3 million.
The AED 3 Million Revenue Test
Revenue must be AED 3 million or less in both:
- The current Tax Period for which the election is made.
- Every previous Tax Period beginning on or after 1 June 2023 that is relevant under the decision.
Revenue is determined in accordance with the accounting standards accepted in the UAE. The test is not based on cash in the bank, taxable income or net profit.
For the meaning of Revenue and taxable income, read how UAE Corporate Tax is calculated.
Current Time Limit
Under Ministerial Decision No. 73 of 2023, the AED 3 million threshold applies to Tax Periods beginning on or after 1 June 2023 and ending on or before 31 December 2026.
A calendar-year business may therefore consider the relief for the year ending 31 December 2026, if eligible, even though the return is generally filed by 30 September 2027.
How Is the Election Made?
Small Business Relief is elected in the Corporate Tax Return for the relevant Tax Period. It is not obtained merely by registering, submitting a separate general application or leaving the taxable-income fields blank.
The election must be made separately for each eligible Tax Period. A person can elect in one period and choose not to elect in another, provided the conditions remain satisfied. However, the historical Revenue test continues to apply.
For the filing process and deadline, read filing and paying a UAE Corporate Tax Return.
Registration and Filing Still Apply
Electing for Small Business Relief does not remove the legal obligations to:
- Register for Corporate Tax by the applicable deadline.
- Submit the Corporate Tax Return for the Tax Period.
- Provide the required information in the return.
- Maintain adequate supporting records.
- Respond to FTA requests and comply with the arm’s length principle.
See UAE Corporate Tax registration and Corporate Tax records and audited financial statements.
Effect on Tax Losses
The effect on losses is one of the most important commercial considerations.
Loss arising during an elected period
A Tax Loss arising in a Tax Period for which Small Business Relief is elected cannot be carried forward. The person is treated as having no taxable income, and the Tax Loss Relief provisions do not apply to that period.
Losses from earlier non-relief periods
A qualifying Tax Loss incurred in a period for which the relief was not elected can generally be carried forward. It cannot be used in the period in which Small Business Relief is elected, but it may remain available for a later period in which the relief is not elected, subject to the normal conditions.
Read the detailed UAE Corporate Tax Losses and carry-forward rules.
Effect on Net Interest Expenditure
Disallowed Net Interest Expenditure arising in a Tax Period for which Small Business Relief is elected cannot be carried forward from that period. Amounts carried forward from an earlier period in which relief was not elected are not used during the elected period but may remain available for a later non-relief period, subject to the applicable rules.
Other Exemptions, Reliefs and Deductions
Where Small Business Relief is elected, the person is treated as having no taxable income and does not apply other exemptions, reliefs and deductions in determining taxable income for that period. This can include provisions that would otherwise affect the ordinary tax calculation.
The person should therefore not prepare an ordinary taxable-income computation and then deduct Small Business Relief as if it were an allowance. The election changes the treatment of the entire period.
Transfer Pricing and Related Parties
A person electing for Small Business Relief must still comply with the arm’s length principle for transactions and arrangements with Related Parties and Connected Persons.
The specific transfer-pricing documentation requirements are relaxed for the elected period under the Small Business Relief framework, but the business should still retain sufficient information to explain and support the commercial basis and pricing of related-party transactions. Other return disclosures may also remain relevant.
Artificial Separation of a Business
A person cannot artificially divide one Business or Business Activity into multiple entities or arrangements to keep each one below AED 3 million and obtain the relief.
Where the FTA determines that Businesses were artificially separated and the combined Revenue exceeds AED 3 million, the arrangement can be treated as an attempt to obtain a Corporate Tax advantage under the general anti-abuse rules.
Genuine separate Businesses can exist, but the commercial reasons, functions, assets, risks, staff, contracts and decision-making should support the separation.
Small Business Relief Is Not the 0% Band
| Rule | Threshold | What it means |
|---|---|---|
| Ordinary Corporate Tax rate | AED 375,000 of taxable income | 0% applies to the first AED 375,000 of taxable income. |
| Natural-person entry threshold | More than AED 1 million of relevant Turnover | Determines whether an individual enters the Corporate Tax regime. |
| Small Business Relief | Revenue of AED 3 million or less, plus all other conditions | An eligible Taxable Person may elect to be treated as having no taxable income. |
A company can have Revenue below AED 3 million but taxable income above AED 375,000. If it validly elects for Small Business Relief, it is treated as having no taxable income. If it does not elect, the ordinary 0% and 9% rates apply.
Worked Examples
Example 1: Profitable eligible company
A resident mainland company has Revenue of AED 2.4 million and taxable income of AED 500,000 for 2026. It has never exceeded AED 3 million in a previous relevant period and is not otherwise excluded. If it elects for the relief, it is treated as having no taxable income for 2026. Without the election, ordinary Corporate Tax would generally be AED 11,250 before credits.
Example 2: Previous Revenue exceeded the threshold
A company has Revenue of AED 2 million in 2026 but had Revenue of AED 3.4 million in 2025. It cannot elect for 2026 because the threshold was exceeded in a previous relevant Tax Period.
Example 3: Natural person
A resident freelancer has relevant Revenue of AED 1.7 million in 2026 and satisfies the other conditions. The person must enter the Corporate Tax regime because Turnover exceeds AED 1 million and may consider Small Business Relief because Revenue remains below AED 3 million.
Example 4: Qualifying Free Zone Person
A Qualifying Free Zone Person with Revenue of AED 1.5 million cannot elect for Small Business Relief. Its treatment must be considered under the Free Zone rules.
Example 5: Tax Loss
A resident company with Revenue of AED 2.6 million makes a Tax Loss. Electing may reduce compliance work but would prevent that period’s Tax Loss from being carried forward. The future profitability of the business should be considered.
When the Relief May Be Helpful
- The business is profitable and would otherwise have taxable income above AED 375,000.
- The business has straightforward operations and wants a simpler Corporate Tax treatment.
- There are no valuable current-period Tax Losses or Net Interest Expenditure to preserve.
- The historical Revenue test and exclusion rules are clearly satisfied.
- The owners understand that the relief is currently time-limited.
When the Election Requires Care
- The business made a loss that could be valuable in future periods.
- The business expects rapid growth and will soon exceed the threshold.
- There are significant related-party transactions or restructurings.
- Revenue classification or historical figures are uncertain.
- The person is in a Free Zone or part of a larger group.
- The business may have been divided among related entities.
- There are carried-forward losses or interest amounts that need to be tracked.
Practical Eligibility Checklist
- Confirm that the Taxable Person is a Resident Person.
- Confirm that the person is not a Qualifying Free Zone Person.
- Confirm that the person is not an excluded member of a large multinational group.
- Calculate Revenue for the current Tax Period under the applicable accounting standards.
- Review Revenue for every previous relevant Tax Period.
- Confirm that Revenue never exceeded AED 3 million.
- Confirm that the Tax Period ends on or before 31 December 2026 under the current rule.
- Review current and carried-forward Tax Losses.
- Review Net Interest Expenditure.
- Consider related-party transactions and the arm’s length principle.
- Assess whether any Business separation could be viewed as artificial.
- Complete the Corporate Tax registration.
- Make the election correctly in the Corporate Tax Return.
- Retain all supporting records for seven years.
Common Mistakes
- Treating the relief as automatic because Revenue is below AED 3 million.
- Applying the threshold to profit instead of Revenue.
- Ignoring a previous period in which Revenue exceeded AED 3 million.
- Assuming the relief removes the registration or return obligation.
- Electing in a loss year without considering the lost carry-forward.
- Assuming every Free Zone company can elect.
- Splitting one Business artificially among related entities.
- Failing to retain records because no taxable income is reported.
- Assuming the relief has already been extended beyond 31 December 2026.
- Confusing Small Business Relief with the ordinary 0% taxable-income band.
Frequently Asked Questions
Is Small Business Relief automatic?
No. It must be elected in the Corporate Tax Return for each eligible Tax Period.
Does a business below AED 3 million need to register?
Revenue below AED 3 million does not itself remove registration. A juridical person may still be required to register, and a natural person applies the separate AED 1 million Turnover entry test.
Does the business still file a return?
Yes. The election is made through the return, so the Taxable Person must file.
Can a company carry forward a loss from an elected period?
No. A Tax Loss arising in the elected Tax Period cannot be carried forward.
Can a loss from an earlier period survive?
A qualifying loss from a period in which relief was not elected may remain available for a later non-relief period, subject to the normal rules.
Can a Qualifying Free Zone Person elect?
No.
Is the relief available after 2026?
Under the current decision, it applies only to eligible Tax Periods ending on or before 31 December 2026. Any extension must be confirmed from an official source.
Where can I find concise answers?
Visit the UAE Corporate Tax FAQs for short answers and links to the detailed guides.
Related Guides
For the overall framework: UAE Corporate Tax Guide 2026
For registration: UAE Corporate Tax registration
For filing the election: filing and paying a UAE Corporate Tax Return
For Revenue and taxable income: how UAE Corporate Tax is calculated
For individuals: UAE Corporate Tax for natural persons
For losses: UAE Corporate Tax Losses and carry-forward rules
For Free Zones: UAE Corporate Tax for Free Zone companies
For records: Corporate Tax records and audited financial statements
Need Help Deciding Whether to Elect?
MAIC can review Revenue history, eligibility, current and carried-forward losses, related-party transactions, accounting records and the financial effect of electing or not electing for Small Business Relief. The decision should be made before the return is submitted and should be supported by complete records.