Small Business Relief: Claiming the AED 3M Threshold in 2026
How small UAE businesses can elect for Small Business Relief and pay 0% corporate tax, eligibility, election process, and pitfalls.
What Small Business Relief Does
Eligible UAE businesses can elect for Small Business Relief (SBR) and be treated as having no taxable income, effectively paying 0% corporate tax. This is separate from QFZP and from the standard AED 375K nil-rate band. For the wider regime, see our UAE corporate tax page.
Eligibility (2026)
You can elect SBR if:
- Your revenue ≤ AED 3,000,000 in the current tax period AND every prior tax period since 1 June 2023
- You are a Resident Person for corporate tax purposes
- You are NOT a Qualifying Free Zone Person (QFZP)
- You are NOT a member of a Multinational Enterprise (MNE) group with consolidated revenue > AED 3.15B
How to Elect
- Election is made in the tax return for the relevant period
- Election is for that period only; you can decide whether to elect each year independently
- The election is irrevocable for that period
What "Revenue" Means
- Gross revenue from all sources, before deductions
- Includes service revenue, sales, financial income
- Determine revenue under applicable UAE accounting standards; do not automatically exclude one-off gains
- Aggregated across all activities of the same legal entity
What You Get
- Treated as having no taxable income for that period
- Still must file a return
- Still must maintain books and records (7 years)
- Can carry forward tax losses → No (losses cannot accumulate while electing SBR)
SBR vs Standard Rate vs QFZP
| Scenario | Tax Outcome |
|---|---|
| SBR elected | 0% on all income |
| Standard (no relief) | 0% up to AED 375K, 9% above |
| QFZP (free zone) | 0% on qualifying, 9% on non-qualifying |
When SBR Is the Wrong Choice
You expect losses
You can't carry forward losses during an SBR period. If you'll be loss-making for 1-2 years before profit, do not elect; preserve losses for future offset instead.You expect to cross AED 3M soon
Once you cross AED 3M, you become ineligible permanently (any period after the breach). Don't elect in the final pre-breach year only to lose the option.You'd benefit more from QFZP
If you're a free zone QFZP, that's typically a better structural position.Common Mistakes
- Forgetting to file: SBR does not waive the filing requirement; a late-filing penalty applies (AED 500–1,000/month)
- Misreporting revenue: Including UAE-source income only when global revenue should be reported
- Ignoring group rules: Two related companies under one UBO may each need to test independently
Interaction with VAT
SBR has no effect on VAT. You must still register for VAT if your taxable supplies exceed AED 375K.
Documentation You Must Keep
- Revenue reconciliation per tax period
- Books of accounts (7 years)
- Election record (in the tax return)
- Evidence of resident status
How Two Pillars Advisory Helps
We assess SBR eligibility, model election vs non-election outcomes, and file returns. Get a Small Business Relief assessment.
Disclaimer
Independent tax consultancy. SBR is governed by FTA Decision 73/2023 and subsequent updates. Always consult a UAE-licensed tax agent for binding advice. 9% UAE corporate tax applies above AED 375,000 in the absence of SBR/QFZP elections.
Review and authoritative references
Last reviewed: . Presentation and reference review; full numerical verification pending.
Official references explain the applicable framework; they do not validate every estimate below. Authority fees, bank tariffs and eligibility can change. Confirm the current requirements before committing funds.