In an effort to support small businesses and reduce the tax compliance burden, the UAE has introduced a special provision known as Small Business Relief (SBR) under its Corporate Tax regime. This initiative is designed to ease the transition for startups and small entities as they adapt to the new tax environment.
What is Small Business Relief?
Small Business Relief allows eligible businesses to avoid the complexities of Corporate Tax compliance, including the need to calculate taxable income or file full tax returns. It is not a permanent exemption from Corporate Tax, but rather a temporary administrative relief mechanism.
Who is Eligible?
To qualify for SBR, a business must meet the following criteria:
· Must be a Resident Taxable Person (Natural or Juridical).
· Revenue must be ≤ AED 3 million in the relevant Tax Period and all prior periods ending on or before 31 December 2026.
· An election for SBR must be made in the Tax Return.
Who is Not Eligible?
Even if the revenue threshold is met, SBR cannot be claimed in the following cases:
1. Multinational Enterprise Groups (MNEs): Any UAE entity part of a group with consolidated global revenue exceeding AED 3.15 billion.
2. Qualifying Free Zone Persons (QFZPs): Those that meet substance, income, and compliance criteria under Free Zone provisions.
Time Limit for Relief
Small Business Relief is available only for:
· Tax Periods beginning on or after 1 June 2023, and
· Ending on or before 31 December 2026.
Businesses must consistently meet the revenue threshold in each period to remain eligible.
Calculation of Revenue
Revenue for the purpose of Small Business Relief includes all income earned at market value, regardless of whether it is in cash, goods, services, or through barter transactions. This also includes Exempt Income such as dividends from UAE companies, which must be included when calculating revenue, even though they may not be taxable under normal Corporate Tax rules.
Note: VAT collected is excluded from the revenue calculation as it does not belong to the business and must be paid to the FTA.
Examples to Illustrate
1.
Eligible
Business:
Mr. X in Abu Dhabi had AED 2M in revenue in 2025 (first year) — eligible for
SBR if election is made.
2.
Not
Eligible:
Ms. Y in Sharjah had AED 1.9M revenue in 2026, but 4.3M in 2025 — ineligible
due to exceeding limit in prior year.
3.
Non-Resident
Business:
ABC Ltd (USA company) with office in Dubai – not eligible, as it is a
non-resident person.
4.
Dividends
& Exempt Income:
Even exempt income like UAE dividends must be included in revenue when
opting for SBR.
What about Tax Losses?
· If a business elects for SBR, any tax losses incurred cannot be carried forward.
· If SBR is not elected, the entity must file full tax return but may carry forward the losses.
Impact on VAT
SBR only affects Corporate Tax, not VAT. Businesses must continue to comply fully with all VAT laws and obligations.
Final Thoughts
Small Business Relief is a golden opportunity for small UAE businesses to ease into the Corporate Tax framework. However, it must be used carefully, considering its eligibility limits, impact on future tax losses, and administrative implications.
At FintEdu, we are committed to simplifying complex tax topics and empowering professionals through technology-driven learning. Let’s grow smart and compliant — together.
