What is Small Business Relief in UAE?

Small business relief (SBR) simply means if your revenue is equal to or below AED 3,000,000 within a tax period, the taxable person is not required to pay any corporate tax. In other words your business will be considered as having no taxable income during the relevant tax period. There are several conditions and considerations that you must keep in mind before you apply for small business relief. We will discuss all of them in this short guide.

Who is Qualified for Small Business Relief

As per the Ministerial Decision No. 73 of 2023, a taxable person must fulfill the small business relief threshold to be eligible for this relief. These thresholds are as follows:

Business Type

• Small business relief under UAE corporate tax is only available for resident persons (natural persons and juridical persons) in the United Arab Emirates.
• SBR is not available for qualifying free zone persons.
• Small business relief cannot be claimed by entities that are part of the MNE Groups or Multinational Enterprises Groups. For knowledge purposes, MNE are companies operating in more than one country with consolidated revenue exceeding 3.15 billion Dirhams.

Threshold for Revenue

• You can avail small business relief for the tax periods commencing on or after 01-June-2023 and ending on or before 31-December-2026.
• As mentioned earlier, the revenue of the business within the tax period must be equal to or less than AED 3 million.
• The revenue for each of the tax periods from 01-June-2023 till 31-December-2026 should remain equal to or below AED 3 million on a yearly basis.

How to Apply for Small Business Relief UAE

The election for SBR is not automatic. A taxable person must elect for small business relief at the time of filing the first corporate tax return. Refer our detailed guide about how to file corporate tax in UAE.

Disadvantages of Small Business Relief

Though there are benefits for small businesses to elect for small business relief where they get exemption from paying any corporate tax until 31-December-2026, there are drawbacks too. There is no “free lunch”.

• Under normal corporate tax return, the corporate tax law allows you to carry forward your losses and adjust them with future profits. But if you elect for SBR, you cannot carry forward your losses to next years.
• There is an inherent disadvantage of this relief which motivates many businesses to artificially split revenue in multiple businesses to remain below the revenue threshold of AED 3,000,000. This generally results in heavy penalties by FTA.
• Once you elect for SBR, you cannot claim any other tax relief or exemptions.

When You Should Not Elect for SBR

Businesses get motivated when they hear they would not have any tax obligations until the end of 2026 and they elect for SBR. But in the long run, they lose because they do not keep the following circumstances under consideration:

• Your business may already be in losses so electing for small business relief will not save you any taxes, but it will disallow you to adjust those losses in the upcoming years.
• Your taxable profit as well as corporate tax liability is negligible. It is better to pay some amount of corporate tax instead of losing the opportunity to adjust any future financial losses with the future profits.
• Your revenue is expected to exceed AED 3m threshold soon. Electing for SBR in such cases is not recommended.

Note: Small business relief is also available for natural persons. To know more about how corporate tax applies to natural persons, please refer to our detailed guide about corporate tax on natural persons.