By Zainab Rampurawala | Published: Sept 3, 2025

📖 Introduction

The UAE Corporate Tax (CT) regime, effective from June 2023, was designed to boost transparency, align with international tax practices, and support economic growth. However, the government also recognizes that small businesses and startups form the backbone of the UAE economy. To ease their compliance burden, the Federal Tax Authority (FTA) introduced the concept of Small Business Relief (SBR).

This provision allows eligible businesses to minimize their tax obligations and compliance requirements, enabling them to focus on growth.

🔹 What is Small Business Relief?

Small Business Relief is an exemption mechanism under the UAE CT Law. Eligible businesses can elect to be treated as if their taxable income is zero, meaning no corporate tax liability arises for that period.

In simple terms: If your business qualifies, you don’t pay corporate tax, and you enjoy simplified compliance.

🔹 Eligibility Criteria

Not all businesses can claim SBR. To qualify, the following conditions must be met:

  • Revenue Threshold: Business must have revenue below AED 3 million for the relevant tax period and for all previous tax periods ending on or before 31 December 2026.
  • Entity Type: Applies to resident juridical persons (companies) and natural persons (individuals conducting business).
  • Exclusions: Not available for:
    • Qualifying Free Zone Persons
    • Constituent companies of Multinational Enterprises (MNEs) with revenues of AED 3.15 billion or more
    • Businesses engaged in excluded activities (e.g., extractive/non-extractive natural resources)

🔹 Key Benefits of SBR

  • ✅ No Corporate Tax Payable – Businesses under SBR are treated as having zero taxable income.
  • ✅ Reduced Compliance Burden – Simplified record-keeping and fewer reporting requirements.
  • ✅ Encourages Startups & SMEs – Allows young businesses to reinvest profits in growth.
  • ✅ Temporary Relief – Available for financial years up to 31 December 2026 (subject to review).

🔹 Example

Suppose a consultancy firm in Dubai has annual revenue of AED 2.5 million in 2024. Since it is below the AED 3 million threshold, it can elect for Small Business Relief. This means:

  • Its taxable income will be considered zero.
  • It will not pay the 9% corporate tax.
  • It still needs to maintain basic records, but compliance requirements are significantly reduced.

🔹 Key Considerations

  • Businesses must formally elect for SBR in their corporate tax return.
  • Revenue calculation must follow accounting standards (IFRS).
  • If revenue exceeds AED 3 million in a future year, SBR cannot be claimed for that year and subsequent years.

✅ Conclusion

Small Business Relief is a game-changer for startups and SMEs in the UAE. It not only reduces financial pressure but also encourages entrepreneurship by giving businesses breathing room during their initial growth years. However, companies must carefully evaluate their eligibility and maintain proper documentation to avoid penalties.

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