Small Business Relief in the UAE: A Clear Guide with Real-World Examples

For small and growing businesses in the UAE, the introduction of corporate tax can feel like a big shift. But there’s good news: the government has introduced the Small Business Relief (SBR) to lighten the burden for businesses earning under AED 3 million. This is a genuine opportunity to simplify your tax obligations and keep more cash in the business—if you know how to use it.

What is Small Business Relief?

The SBR allows an eligible business to be treated as if it did not derive any taxable income in a given tax period. In practical terms: if you qualify, you may not owe corporate tax for that period. You still file a return, but you avoid the 9% tax on profits.

It’s designed to help smaller firms reinvest, grow, and get comfortable with the new corporate tax environment. Think of it as a leg-up during the early years.

Eligibility: What You Need to Know

• Revenue Limit

Your business must have revenue of AED 3 million or less in the current tax period and all prior tax periods ending on or before 31 December 2026.

• Who Can Claim

You must be a UAE resident person (natural or juridical). Free zone, mainland or outside-UAE companies may qualify, provided they meet the resident criteria.

• Who Cannot Claim

There are key exclusions: if you’re a Qualifying Free Zone Person (QFZP) or a member of a multinational enterprise group (with consolidated revenue above AED 3.15 billion), you cannot opt for SBR.

Additionally, if in one tax period the company had revenue above AED 3 million, you cannot use SBR for that year or future years.

What You Give Up When You Elect for Small Business Relief

While SBR offers significant advantages, notably the 0% tax rate for qualifying periods, it also comes with important trade-offs. Businesses that elect for SBR cannot claim or carry forward certain deductions and benefits available under the normal corporate tax regime.

Specifically, when you opt for SBR in a tax period:

• You cannot carry forward any tax losses incurred during that period to offset future taxable income.

• You cannot carry forward any net interest expense disallowed under Article 30 of the Corporate Tax Law.

• You cannot apply for foreign tax credits even if foreign income is included.

• You are not required to calculate or report adjusted taxable income the election automatically treats your taxable income as “zero.”

• You must still maintain proper financial records and documentation to substantiate your eligibility for SBR if reviewed by the FTA.

So, while SBR simplifies tax in the short term, it may limit long-term planning flexibility, especially for businesses expecting to grow or generate significant deductible expenses later.

Why It’s a Good Opportunity

• Zero tax liability for that period: meaning more cash stays in your business.

• Simplified compliance: you skip some of the heavier documentation and filing requirements.

• Focus on growth: less tax distraction means more time for running and scaling your business.

Four Real-World Examples

Example 1: Boutique Creative Studio

Revenue: AED 2.2 millionSituation: Small design studio with loyal clients, minimal interest expenses, and muted growth expected this year.Decision: Elect for SBR. The zero-tax outcome lets the studio put more into marketing and hiring without worrying about tax for the year.

Example 2: Early-Stage Retail E-commerce

Revenue: AED 1.4 million, projected to reach AED 4.5 million next yearSituation: Heavy investment phase, expecting growth and losses this year.Decision: Skip SBR. By staying outside SBR, they preserve tax loss carry-forwards and interest deductions which will matter when profits appear.

Example 3: Free Zone Trading Entity

Revenue: AED 2.9 millionSituation: Based in a Free Zone but not eligible as QFZP because major customers are mainland-based.Decision: Elect for SBR. The revenue is below threshold and qualifies. This gives simplicity while they rebuild or shift client base to qualify for other reliefs later.

Example 4: Service Provider with Variable Income

Revenue: AED 3.0 million (this year); AED 2.7 million (last year)Situation: Barely under limit this year, but last year close to threshold.Decision: Elect SBR cautiously. They must monitor revenue closely and project next year’s income. If revenue spikes, next year they’ll lose SBR eligibility and face full tax.

How to Elect SBR: What You Must Do

1. Register for Corporate Tax (TRN) with the FTA if you haven’t already.

2. When filing your CT return for the tax period, elect for Small Business Relief.

3. Maintain supporting records including revenue details, accounting standards used, resident status, etc.

4. Be aware: Once a return is filed without the election, you cannot reclaim SBR for that period.

Final Thoughts from a Tax Advisor’s View

If your business is comfortably below AED 3 million revenue and you expect this to continue, SBR is a opt-in relief, straightforward, beneficial and low-maintenance.

If you anticipate growth, have losses to carry forward, or complex income streams, you might decide to skip SBR and stay in the standard regime (or plan for a QFZP path).

Either way, it’s not just about “can I claim it?” but “should I claim it now or later?” The decision can shape your cash flow, tax position and business strategy for years.

For detailed guidance, businesses can refer to the official FTA Small Business Relief Guide.

How Arzonell Can Help

At Arzonell, we walk businesses through the SBR decision with clarity. We’ll:

• Review your revenue, prior years and projections

• Check eligibility criteria and future implications

• Help you make the election accurately and on time

• Monitor future years to evaluate if SBR continues to make sense or if you should adjust strategy

Whether you’re a newly registered entity or an established small business, Arzonell can help you stay compliant, avoid penalties, and make the most of the Small Business Relief opportunity.

Reach out to us: info@arzonell.com | +971 52 191 5973