What is Small Business Relief?
Small Business Relief is a simplification measure under Federal Decree-Law 47/2022 on Corporate Tax, introduced by Ministerial Decision 73 of 2023. It allows resident juridical persons and natural persons conducting business in the UAE to elect to be treated as not having derived any taxable income in a tax period, effectively resulting in a 0% Corporate Tax liability for that period, provided revenue does not exceed AED 3,000,000 for the relevant period and all preceding tax periods.
The relief is designed for startups, freelancers, sole establishments and small SMEs across Dubai, Abu Dhabi and Sharjah who would otherwise face disproportionate compliance costs relative to their turnover. It does not remove the obligation to register — see our corporate tax registration service for the AED 799 registration package available 100% online.
Revenue ≤ AED 3,000,000 in the current period AND every prior period since incorporation, election made in the return, no disqualifying entity type (Qualifying Free Zone Person, member of a Multinational Enterprise Group with consolidated revenue ≥ AED 3.15 billion, or a bank/insurer), and no artificial separation of business.
The AED 3 million revenue threshold explained
Revenue for SBR purposes is gross revenue as reflected under applicable accounting standards (IFRS or IFRS for SMEs), before deducting any expenditure. It is not net profit. A business with AED 2.9 million in total sales but a net loss can still elect for SBR; a business with AED 3.1 million in revenue cannot, even if its taxable profit is small.
The threshold is tested for the relevant tax period on a pro-rated basis if the period is shorter or longer than 12 months. For example, a business with a 6-month first tax period must pro-rate the AED 3,000,000 limit down to approximately AED 1,500,000 for that shorter period.
| Tax period length | Pro-rated revenue threshold |
|---|---|
| 12 months (standard) | AED 3,000,000 |
| 6 months (short first period) | AED 1,500,000 |
| 9 months | AED 2,250,000 |
| 18 months (long first period, capped at max allowed) | AED 4,500,000 (subject to FTA guidance on maximum period length) |
The 'all prior tax periods' test
A critical and often misunderstood condition is that SBR is only available if revenue in the current tax period AND in all previous tax periods (since the business became subject to Corporate Tax) has not exceeded AED 3,000,000. This is a cumulative, backward-looking test, not just a current-year test.
Practically, this means once a business exceeds AED 3,000,000 in revenue in any tax period, it permanently loses eligibility for SBR in all future tax periods — even if revenue later falls back below the threshold. This is one of the harshest features of the relief and should be factored into growth planning.
- Year 1 revenue AED 2.5m, Year 2 revenue AED 3.4m: SBR was available in Year 1, but Year 2 and every year after are permanently ineligible.
- Year 1 revenue AED 3.2m: SBR is never available for this business, even in later low-revenue years.
- Businesses close to the threshold should track monthly revenue and consider bookkeeping and accounting support to monitor real-time exposure.
How to elect for SBR on EmaraTax
SBR is not automatic. It must be actively elected in the Corporate Tax return filed through the FTA's EmaraTax portal for each tax period the business wishes to benefit. There is no separate application form — the election is made as part of the annual return, which must still be filed within 9 months of the end of the relevant tax period (30 September 2026 for a 31 December 2025 year-end).
- 1Confirm the business is registered for Corporate Tax via corporate tax registration.
- 2Prepare revenue figures for the current and all prior periods to confirm the AED 3,000,000 test is met.
- 3Log in to EmaraTax and open the Corporate Tax return for the relevant period.
- 4Select the Small Business Relief election option within the return.
- 5Submit supporting revenue schedules if requested and retain records for at least 7 years.
- 6File the return before the 9-month deadline to avoid the AED 500/month late filing penalty.
Our corporate tax filing service (from AED 999*) prepares and submits the SBR election accurately on EmaraTax, with WhatsApp support and a reply within 30 minutes.
Effect and sunset: relief applies until 31 December 2026
Small Business Relief is currently available for tax periods starting on or after 1 June 2023 and ending on or before 31 December 2026. This means the last tax period for which a calendar-year business can elect SBR is the year ending 31 December 2026. Beyond that, unless the Ministry of Finance extends the measure, all eligible businesses will need to compute Corporate Tax normally, applying the 0% rate on the first AED 375,000 of taxable income and 9% above that.
Businesses relying on SBR should start building proper accounting records and cash-flow provisions now for the transition to standard Corporate Tax computation from 2027 onward. Use our Corporate Tax calculator to estimate future liability.
What still applies even if you elect SBR
Electing SBR only affects the computation of taxable income — it does not exempt a business from the full range of Corporate Tax compliance obligations. The following remain mandatory:
- Corporate Tax registration on EmaraTax and obtaining a Tax Registration Number, regardless of revenue level — see corporate tax registration.
- Annual Corporate Tax return filing within 9 months of the tax period end, even though the tax due will be nil.
- Maintaining proper bookkeeping and accounting records for at least 7 years — see bookkeeping & accounting and backlog accounting if records have fallen behind.
- Transfer pricing documentation obligations continue to apply in principle, although businesses electing SBR are relieved from preparing a Master File and Local File; arm's length pricing with Related Parties and Connected Persons should still be observed.
- VAT registration and filing obligations remain entirely separate and unaffected by SBR — see VAT registration and VAT filing.
Circumstances that cause loss of relief
Beyond exceeding the AED 3,000,000 threshold, SBR is unavailable to Qualifying Free Zone Persons benefiting from the 0% free zone Corporate Tax regime, members of Multinational Enterprise Groups with consolidated group revenue of AED 3.15 billion or more, and licensed banks and insurance providers. Electing SBR while ineligible can trigger reassessment, back-tax, and penalties.
| Scenario | SBR outcome |
|---|---|
| Freelancer, Dubai, revenue AED 1.2m | Eligible — can elect SBR |
| Trading LLC, Abu Dhabi, revenue AED 3.4m | Not eligible — exceeds threshold |
| IFZA free zone company benefiting from 0% Qualifying Income regime | Not eligible — Qualifying Free Zone Person exclusion applies |
| Sharjah SME, subsidiary of a multinational group with AED 4bn global revenue | Not eligible — MNE Group exclusion applies |
| Two related sole establishments artificially split to stay under AED 3m each | Not eligible — anti-abuse rule applies, revenue aggregated |
Artificial separation of business (anti-abuse rule)
The FTA applies a specific anti-abuse rule targeting the artificial separation of a business or business activity into multiple entities solely to keep each entity's revenue under the AED 3,000,000 threshold. If the FTA determines that such separation was the main or one of the main purposes for structuring in that manner, it will treat the combined arrangement as a single taxable person and deny SBR retroactively, alongside applying Cabinet Decision 100/2023 general anti-abuse provisions.
Indicators the FTA may examine include shared management, shared premises, overlapping customer bases, common branding, and financial interdependency between the entities. Businesses genuinely operating multiple independent lines should maintain clear documentary evidence of commercial substance — our tax advisory service can review structuring risk before filing.
Interaction with the free zone Corporate Tax regime
Free zone businesses in IFZA, DMCC, Meydan, SHAMS, JAFZA and other zones that have elected to be, and qualify as, a Qualifying Free Zone Person under Cabinet Decision 100/2023 are automatically excluded from SBR — they instead benefit from a 0% rate on Qualifying Income and 9% on non-qualifying income above the de minimis threshold. A free zone entity that has not elected or does not meet Qualifying Free Zone Person conditions is taxed as a standard resident person and can consider SBR if revenue is below AED 3,000,000.
Choosing between the free zone regime and SBR eligibility is a one-time strategic decision with long-term consequences, since failing the Qualifying Free Zone Person conditions in any period can permanently disqualify the entity from that regime for the current and following four tax periods.
Worked examples
| Business | Revenue (this period) | Prior period revenue | SBR available? | Corporate Tax due |
|---|---|---|---|---|
| Freelance consultant, Sharjah | AED 850,000 | AED 600,000 | Yes | AED 0 (elected) |
| E-commerce SME, Dubai | AED 2,950,000 | AED 2,100,000 | Yes | AED 0 (elected) |
| Retail trading LLC, Abu Dhabi | AED 3,050,000 | AED 2,800,000 | No | 9% on income above AED 375,000 |
| Consultancy, Dubai (2nd year) | AED 2,000,000 | AED 3,500,000 (Year 1) | No — permanently disqualified from Year 1 breach | 9% on income above AED 375,000 |
Model your own scenario with our Small Business Relief calculator or the broader Corporate Tax calculator to compare outcomes before filing.
Documentation to retain
Even though SBR simplifies the tax computation, the FTA can request supporting evidence for up to 7 years. Businesses electing SBR should retain:
- Revenue schedules and sales ledgers for the current and all prior tax periods.
- Bank statements and invoices supporting reported revenue figures.
- Trade licence, Memorandum of Association and details of related parties to support the anti-abuse assessment.
- Copies of EmaraTax return submissions confirming the SBR election was made each period.
- Any correspondence with the FTA regarding registration, clarifications or audits.
If your records need organising before filing, our backlog accounting and financial reporting services bring multi-year books up to date quickly.