If your business currently pays 0% corporate tax thanks to Small Business Relief, you don’t have much time left to prepare for what comes after. The relief is only available through the end of 2026, and no extension has been announced so far. Here’s who qualifies now, what changes from 2027, and how to prepare in advance.
What is Small Business Relief?
Small Business Relief is a corporate tax relief introduced under Ministerial Decision No. 73 of 2023, based on Article 21 of the Corporate Tax Law. It allows resident companies with revenue up to AED 3,000,000 to be treated as having no taxable income for the period, effectively paying 0% tax instead of the standard 9% on profit above AED 375,000.
An important detail: the relief doesn’t apply automatically. You have to actively elect it in your corporate tax return for each individual tax period. If you forget to tick that box, tax gets calculated at the standard rate.
Who can qualify for the relief?
The conditions sound simple, but the details matter:
- Revenue must be at or below AED 3,000,000 in both the current tax period and every previous one. If revenue exceeds the threshold even once, eligibility for the relief is lost permanently, even if revenue later falls back below AED 3 million.
- What’s measured is revenue (gross income), not profit. A company with high turnover but thin margins can still fail to meet the threshold.
- The relief is not available to Qualifying Free Zone Persons or to members of large multinational groups with consolidated group revenue above AED 3.15 billion.
- If you have a tax group made up of several companies, the AED 3 million threshold applies to the group’s consolidated revenue, not to each company individually. The FTA explicitly treats artificially splitting a business into multiple entities to keep each one below the threshold as abuse, and can challenge such a structure.
What’s the trade-off in electing the relief?
Small Business Relief isn’t a free gift with no strings attached. If you elect the relief for a period, you give up the right to carry forward tax losses and disallowed net interest expenditure from that same period. For a business currently running losses or carrying high interest costs on loans, it may actually be more advantageous not to elect the relief, and instead preserve those losses to offset future profitable periods. There’s no universally correct answer here, it needs to be calculated case by case.
What changes after 2026?
This is the key point that many small business owners are still underestimating. For tax periods starting on or after January 1, 2027, Small Business Relief stops applying altogether, no exceptions based on revenue will remain. Every company, regardless of size, moves onto the standard regime: 9% tax on profit exceeding AED 375,000. In practice, this means a sharp jump in tax burden for businesses that previously paid nothing. For example, a consultancy with AED 2.5 million in revenue and AED 800,000 in profit might pay no tax at all in 2026 thanks to SBR. From 2027, that same company with the same numbers would owe roughly AED 38,250 in corporate tax.
What should businesses do now?
The biggest mistake many small companies are making right now is not setting aside money for future tax, because “right now it’s 0% anyway.” That creates a real risk of a cash flow gap in 2027, when tax becomes due for the first time and there’s no reserve set aside for it.
A few steps worth taking before the end of 2026:
- Calculate what your tax burden would look like at the standard 9% rate applied to your current numbers, so you know the order of magnitude in advance.
- Start setting aside a reserve for future tax, rather than treating that money as free operating income.
- Check whether it might actually be better to opt out of SBR in certain periods to preserve losses for carry-forward, especially if the business is planning growth or major investment in the coming years.
- Make sure your bookkeeping and reporting are in order now: from 2027, errors in filings will cost more, and the FTA cross-checks VAT and corporate tax data against each other.
If you’re not sure whether to elect the relief this period, or how to plan your transition into 2027, we can go through your specific situation together on a free consultation with Aizhan.
