Corporate Tax Relief for Small Businesses in the UAE

Small businesses in the UAE face many challenges. High costs, rising competition, and complex paperwork can make it hard to grow. For many, the new corporate tax law has added another concern: how to stay compliant while managing tight budgets.

Thanks to the UAE government, there is still some relief. The UAE government introduced a policy that offers tax relief to small businesses. It’s called “Small Business Relief” under the corporate tax law.  It allows eligible businesses to avoid paying corporate tax, giving them a chance to reinvest in growth and stay financially healthy. Here’s how it works and who can benefit.

Tax Gian, one of the best tax agents in the UAE, helps businesses understand their liabilities better and comply with the tax laws accordingly.

Who Can Apply for corporate tax relief in the UAE?

Small Business Relief is available to UAE residents. This includes both individuals running businesses (natural persons) and companies (juridical persons). To apply:

• Your business must be registered in the UAE.
• You must have a valid Tax Registration Number (TRN).
• You must submit a request for relief in your corporate tax return.

This relief is available for each tax period, but you have to choose it every year by filing a request with the tax authority. If you miss this step, you can’t claim it later for that period.

To better understand how you can apply for relief, you can ask the best tax agents in Dubai.

Revenue Limit Your business must have earned AED 3 million or less in revenue during the tax period. Also, in all previous tax periods, your revenue must not have exceeded AED 3 million. This rule will apply until December 31, 2026. If your business ever crosses this limit, even once, you lose the option to apply for Small Business Relief, now and in future years.

What Constitutes Revenue Under UAE CT Law for SBR?

According to Ministerial Decision No. 73 of 2023 and related clarifications: Revenue includes:

• All income derived from business or business activities in the UAE and abroad, including:

• • Sales of goods or services
  • Income from contracts
  • Commission income
  • Fees
  • Royalties
  • Interest and investment income (if part of the business)
  • Other operating income

Revenue is determined based on the applicable accounting standards (e.g., IFRS for SMEs) used in preparing financial statements. Revenue Does Not Include:

• Capital contributions
• Loan proceeds
• Owner’s withdrawals
• Revaluation gains of assets not yet realized
• Intra-group transfers (if not part of normal operations)
• Non-business income (unless it arises from a business activity)

Important Notes:

• The AED 3 million revenue threshold applies on a group level if the taxpayer is part of a tax group or related party structure.
• Once revenue exceeds AED 3 million in any tax period, the business can no longer claim SBR in future periods, even if revenue later falls below the threshold.

The AED 3 million revenue threshold for SBR is based on gross revenue, not taxable income.

As per Ministerial Decision No. 73 of 2023, revenue includes all income earned, including exempt income, as reported in the financial statements based on the applicable accounting standards.

Deductions, exemptions, and reliefs are not applied when calculating the revenue for SBR eligibility

Who Cannot Apply for Small Business Relief in the UAE?

Not every business qualifies. Here are the cases where relief is not available:

• Multinational Groups (MNEs): If your business is part of a larger group with combined revenue of more than AED 3.15 billion, you are not eligible.
• Qualified Free Zone Persons (QFZP): If your business is based in a free zone and already enjoys a 0% tax rate on qualifying income, you can’t use this relief.
• Artificially Split Businesses: If a company splits into smaller units just to stay below the AED 3 million mark, the tax authorities may reject the relief and charge penalties.

What does the Small Business Relief Offer?

If approved, your business will be treated as having no taxable income for that period. This means:

• No corporate tax to pay.
• No need to calculate taxable income.
• You may use simple accounting methods like the cash basis.

But keep in mind:

• You still need to file a tax return.
• You must keep proper records.
• You need to comply with the arm’s length principle for transactions with related parties, though you’re not required to prepare detailed transfer pricing documents.

What You Can’t Claim with the Relief

Using Small Business Relief means giving up access to other tax benefits. These include:

• Loss Carry Forward: You can’t carry forward any business losses to reduce future taxes.
• Interest Deductions: You won’t be able to deduct interest expenses.
• Expense Deductions: No claims for deductions on rent, salaries, or other costs.
• Other Reliefs: Reliefs for investing in specific assets or sectors won’t apply.
• Tax Grouping: If you’re in a tax group, you can’t use this relief.

Basically, your business is considered tax-free; so there’s no need (and no option) to use deductions or other tax-saving tools. Ask more about this from corporate tax agents in the UAE.

Keep Records for 7 Years

Even if your business qualifies for tax relief, you must keep all records related to your revenue and operations. This includes invoices, receipts, bank statements, and other documents. Records must be kept for at least seven years and should be accessible in case the tax authority asks for them.

Digital copies are fine; just make sure they’re complete and easy to find.

Conclusively, Small Business Relief is a helpful move for UAE-based businesses trying to manage costs. It lowers tax pressure, especially for startups and small enterprises still building a stable income. But it comes with conditions and trade-offs.

If your revenue stays under AED 3 million and you meet all other rules, this relief can give your business breathing space. Just be sure to file correctly with the help of corporate tax consultants in Dubai, keep accurate records, and plan. That way, you can make the most of this opportunity and avoid trouble later.

Tax Gian Can Help You Avoid Extra Taxes!

Sometimes, businesses in the UAE are eligible for tax exemptions and reliefs, but they don’t avail them due to a lack of information and knowledge. Corporate tax consultants in the UAE, like Tax Gian, help businesses understand their liabilities and avail tax reliefs wherever possible. Our tax agents, who are experts in their field, guide our clients best.