Small Business Relief (SBR) UAE: AED 3M Revenue Rule (2026)

What is the Small Business Relief (UAE Corporate Tax Law)?

Small business relief is a financial incentive and temporary tax exemption to help SMEs with corporate tax burden. The threshold applies to Tax Periods starting on / after 1 June 2023 and continues only for Tax Periods ending on / before 31 December 2026 (unless extended by a future Federal Tax Authority or Ministerial decision).

Eligible businesses can elect small business relief in their own corporate tax returns.

According to the revenue thresholds set by SBR eligibility criteria, SMEs must provide evidence to qualify for both the current and previous tax periods. If your revenue surpassed AED 3 million in any prior tax period, you are automatically disqualified from SBR.

Who qualifies for Small Business Tax Relief?

Under Ministerial Decision No. 73 of 2023, the following are qualified for SBR. Here’s the eligibility criteria for SBR

1. Resident persons in the UAE This incentive is available to eligible resident taxable persons only to reduce costs on taxation and other compliance burdens.
2. Taxable persons including juridical persons and natural persons A Tax Group can elect SBR because it is treated as a single taxable person. The AED 3 million revenue threshold applies to the entire group’s combined revenue, rather than to each individual member.
3. Revenue threshold for small business owners capped at AED 3 million within the current and all previous tax periods ending Corporate tax relief is eligible for businesses with maximum revenue limit of AED 3 million per annual tax period (i.e. based on gross revenue, not profit or taxable income)

What counts towards annual revenue?

• Sale of goods
• Service income
• Subscription fees (especially if you’re a SaaS venture)
• Management fees
• Asset disposals
• Other operating revenue or income
• This excludes VAT collected on behalf of the government and any calculation or adjustments for expenses, deductions, or reliefs.

Do free zone companies qualify? Who else is excluded from SBR?

Certain profiles are automatically not eligible for the program. Qualifying free zone persons cannot elect for SBR since they already benefit from 0% tax rate on qualifying income.

Members of a multinational enterprise group are automatically excluded from SBR. MNEs can be defined as:

1. Two or more companies taxed in different jurisdictions
2. One single company taxed in one country and taxed with respect to the business activities it carries through a permanent entity located in a different country
3. A total consolidated group revenue of AED 3,150,000,000 during the fiscal year preceding the current relevant period
4. This generally means that two or more entities are:
   • related
   • tax resident in more than one country; or
   • one entity with a permanent establishment in another country

How does SBR reduce your tax burden under Corporate Tax rules?

When a business elects for financial relief, they are treated as having no taxable income for that specific tax period. Taxable income is set zero by law, thus making corporate tax payable nil. Finance teams can skip calculating taxable income for the year it applies, giving them administrative relief.

1. Exempt Income Normally, businesses under corporate tax must identify nontaxable income (e.g. qualifying dividends) and deduct that from accounting profit.Because of SBR, this step is no longer required and all income is effectively ignored.
2. Other Tax adjustments to taxable income calculation No adjustments apply since there is nothing left to reduce.
3. Eligible deductions (including deductible expenses, interest deductions, etc) There is no need to assess deductible expenses for that period. However, a disadvantage of electing SBR is you cannot carry forward the interest expenses that exceed the allowable limits within the tax period to future periods for deductions.
   
   Businesses with heavy financing structures or significant borrowing costs may find the short term tax benefits less beneficial.
4. Tax loss relief When SBR is applied, tax losses cannot accrue and be used or generated for that period. Loss utilization is paused for that year.
5. Transfer pricing documentation is not required, but businesses must still comply with transfer pricing rules.
   All related party transactions must be conducted with arm’s length principle and reflect market value.

The FTA may refuse SBR where:

• There is proof that the business is artificially separated
• Certain arrangements were made to stay below the AED 3 million threshold

Under artificial separation, the UAE government mandates that FTA may flag and refuse corporate tax relief if they find evidence of shifting income or future profits between entities.

What qualifies for revenue and gross business income?

To calculate revenue accurately, make sure to add all gross income based on what is earned from business activities. This includes:

• Investment income including dividend income
• Core operating income from sale of goods or services rendered
• Licensing fees, royalties, commissions
• Asset income including gains, lease, rental income
• Other business related income that is reflected in cash flow and bank statements

There is no need to deduct operating expenses (e.g. salaries, rent, depreciation, net interest expenditure), even if it is partially or fully deductible.

For natural persons, Personal Investment Income, Real Estate Investment Income, and Wages are generally excluded from the Business or Business Activity subject to Corporate Tax.

Compliance Requirements for SBR

Businesses generally use the applicable accrual-based accounting standards when determining Revenue. However, a Person with Revenue not exceeding AED 3 million may prepare Financial Statements using the cash basis of accounting, subject to the applicable Corporate Tax rules.

Proper records must still be kept for at least seven years to stay compliant with corporate tax law.

Common Mistakes and Misconceptions of using SBR for Corporate Tax Purposes

1. I don’t need to file simplified tax returns if I don’t have to pay corporate taxes.
   You can only elect for SBR in your filed returns. Even if you meet all the criteria, the FTA does not grant the relief automatically, and you need to make sure to explicitly opt in. Having no tax liabilities does not exempt you from filing CT returns via EmaraTax
2. I can submit my returns anytime.
   You still need to submit your returns by the filing deadline, within 9 months after tax period ends. Failure to do so would result in penalties.
3. Once I have submitted the paperwork needed for SBR, I can rest easy on compliance requirements.
   Not necessarily. FTA may audit your company in future years, and incorrect claims may lead to loss of relief and additional administrative penalties. Make sure the following documents are retained for at least seven years:
   • Financial statements and supporting documents
   • Revenue breakdowns
   • Accounting records such as invoices, etc