Small Business Relief in UAE Corporate Tax. Who can claim it and when it makes Sense

Small Business Relief is a compliance and tax simplification option available to qualifying UAE resident businesses. When elected, the business is treated as having no taxable income for that tax year, which results in no corporate tax liability.

The purpose of this relief is to make corporate tax easier to manage for smaller entities by reducing calculation complexity and reporting burden while still keeping them within the formal tax system.

It is important to note that relief applies through an election filed with the tax return, not by default.

When a business chooses Small Business Relief for a tax period:

• Taxable income is deemed to be zero

• No corporate tax is charged for that year

• Detailed tax adjustments are not required

• Some advanced tax rules are not applied

• Filing obligations still continue

This approach replaces complex tax computation with a simplified declaration but only for businesses that meet the qualifying conditions.

Eligibility is primarily based on revenue size. A business can elect Small Business Relief if its total revenue does not exceed AED 3 million for:

• The current tax period, and

• All earlier tax periods

The relief is currently available for qualifying periods up to 31 December 2026. Revenue is the deciding metric here, which means even high-margin small firms must check carefully.

Generally, the relief is available to:

• UAE incorporated companies

• UAE resident entities

• Individuals conducting licensed business activities in the UAE

The business must qualify as a resident taxable person under corporate tax rules.

Certain entities are specifically excluded from this relief:

• Qualifying Free Zone Persons

• Members of large multinational groups

• Businesses exceeding the revenue cap

• Structures created mainly to artificially stay below the limit

Authorities apply anti-abuse principles to prevent misuse through entity splitting or revenue shifting.

Electing Small Business Relief reduces technical tax workload. Businesses may benefit from:

• No detailed taxable income adjustments

• Reduced technical calculations

• Lower transfer pricing documentation exposure

• Simpler accounting approaches in many cases

That said, core record-keeping is still required. Books of accounts and supporting documents must be maintained.

For eligible businesses, SBR can be strategically useful.

• Cash preservation — No corporate tax outflow for the elected year

• Lower advisory costs — Reduced computation complexity

• Simpler filing process — Less technical tax modeling required

• Operational focus — Founders can prioritize growth over tax mechanics

Small Business Relief is not always the optimal path. It removes certain benefits along with tax liability.

1. Losses cannot be carried forward  If your business records a loss during a relief year, that loss cannot be used to offset future profits.

2. Other tax provisions become unavailable. You generally cannot use:

• Loss relief mechanisms

• Net interest deductions

• Group relief structures

• Certain adjustment claims

1. No tax group participation. Businesses electing SBR cannot be part of a corporate tax group during that period.

2. Threshold crossing ends relief. If revenue goes above AED 3 million, standard corporate tax rules apply going forward.

SBR is typically beneficial for:

• Early-stage profitable businesses

• Small service firms

• Founder-led consultancies

• Low-expense, steady-margin entities

It may be less suitable for:

• Investment-heavy startups

• Businesses expecting tax losses

• Companies planning group structuring

• Rapidly scaling ventures near the revenue cap

A year-wise evaluation is the best approach before making the election.

Every business is different and choosing whether to elect Small Business Relief should be based on your revenue pattern, growth plans, and tax position.

At Kitaab, we work closely with startups and SMEs to align their business goals with the right financial and compliance strategy. Our team helps build a streamlined financial ecosystem from structuring and tax planning to ongoing accounting and reporting so your business runs smoothly while you stay focused on growth.

If you’d like clarity on your eligibility or want help making the right corporate tax choice, speak with a Kitaab advisor today.

  Book a consultation call we’re happy to guide you!