When the UAE introduced corporate tax, a relief measure came with it meaning that if your revenue is small, you may not have to pay tax at all. It’s called Small Business Relief. In practice, though, there are more questions around it than it might seem.
- Who actually qualifies?
- What can cause you to lose this status?
- What do you need to do for the relief to apply correctly?
What is Small Business Relief?
Small Business Relief is a mechanism introduced by the UAE Ministry of Finance under the corporate tax regime. It allows companies with revenue of up to AED 3,000,000 per tax period to avoid paying corporate tax and to simplify their tax reporting.
The relief applies to tax periods starting on or after 1 June 2023. It is elective meaning a company must actively choose to apply it when filing its tax return.
Who is eligible for Small Business Relief?
The relief is available to UAE resident legal entities whose revenue has not exceeded AED 3,000,000 in the current and all previous tax periods from 2023 onwards.
Key restrictions:
— The relief is not available to members of a corporate tax group applying the consolidation regime
— It does not apply to Qualifying Free Zone Persons
— If the company is part of a large multinational group with consolidated revenue exceeding AED 3.15 billion, Pillar Two / DMTT rules apply — SBR won’t help here
What pitfalls should you know about?
The most common mistake is assuming the relief applies automatically. It doesn’t. If you didn’t elect SBR in your return, you’re required to calculate and pay tax under the standard rules.
The second risk is artificial business splitting. The FTA explicitly states that if a structure is created to keep revenue below the threshold, it will be treated as abuse. The consequences can include back taxes, penalties, and increased scrutiny from the regulator.
The third point: the AED 3,000,000 threshold is cumulative. If revenue exceeded the limit in any one period, the relief is lost and cannot be reinstated for prior periods.
How to apply SBR correctly?
If you meet the criteria, here’s what to do:
— Confirm that revenue across all periods from 2023 has not exceeded AED 3,000,000
— Check that you are not part of a consolidated group or subject to Pillar Two
— When filing your corporate tax return, actively elect the Small Business Relief option
— Keep documentation confirming your revenue figures the FTA may request it during an audit
Even if you apply SBR, basic registration and filing obligations remain in place.
Conclusion
Small Business Relief is a real benefit that can save money and simplify life for small businesses in the UAE. But it only works if it’s applied correctly, properly documented, and doesn’t violate FTA requirements.
If you’re unsure whether your company qualifies for SBR, or want to make sure everything is in order, book a free 15-minute consultation with Aizhan: +971509174775
