Small Business Relief in the UAE: Corporate Tax Exemption

The introduction of Corporate Tax in the UAE raised an obvious question for small business owners and sole proprietors: would they now have to hand over part of their profit to the state? For smaller companies, the UAE authorities introduced a separate support mechanism — Small Business Relief (SBR), which, subject to conditions, allows a company to avoid paying Corporate Tax entirely.

What is Small Business Relief

Small Business Relief is a tax concession for small resident businesses in the UAE that exempts them from calculating and paying Corporate Tax. The point of the relief is to reduce the administrative and financial burden on startups and small companies as they grow.

An important nuance: even while applying SBR, a company is required to file a simplified tax return with the Federal Tax Authority (FTA) — the filing deadline is 9 months after the end of the tax period. The relief doesn't remove the obligation to report; it zeroes out the tax amount.

Who is eligible for the relief

Two types of UAE tax residents can claim SBR:

Individual entrepreneurs — individuals lawfully carrying out business activity in the UAE. Salary, income from personal investments, and income from personally owned real estate (where no licence is needed for it) aren't subject to tax in the first place, regardless of SBR.
Legal entities — companies registered both on the UAE mainland and in free zones, with the exception of "Qualifying Free Zone Persons."

The main condition — the revenue threshold

The key criterion is the amount of gross revenue. To qualify for SBR, the company's revenue for the current and the preceding tax period must not exceed AED 3,000,000. Revenue here means total gross income before deducting expenses, including:

revenue from selling goods and services;
interest, dividends, royalties;
insurance premiums and other receipts.

The relief applies to tax periods ending before 31 December 2026 — businesses have a defined window in which to use it.

How to apply the relief in practice

The procedure is about as simple as it gets: when filling out the simplified tax return in the FTA system, you select the "Small Business Relief" option — the system applies the exemption itself and calculates the final liability as zero.

Calculation examples

Example 1. A successful freelancer. Revenue for the period — AED 2,950,000, taxable income — AED 500,000. Revenue is under AED 3 million, so SBR applies. Result: tax due — AED 0.

Example 2. A growing company. Revenue for the period — AED 3,050,000, taxable income — AED 450,000. Revenue exceeds the threshold, so the relief doesn't apply: the first AED 375,000 is taxed at 0%, and the remaining AED 75,000 at 9%. Tax due: 75,000 × 9% = AED 6,750.

Bottom line

Small Business Relief is a genuine, legal way for small businesses in the UAE to save money: if a company's annual turnover consistently stays below AED 3 million, Corporate Tax doesn't need to be paid at all. The key is filing the simplified return on time and correctly calculating gross revenue, not profit.

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Frequently asked questions

Does a return still need to be filed if Small Business Relief applies?

Yes. SBR zeroes out the tax amount, but it doesn't remove the obligation to report to the FTA. The simplified return must be filed within 9 months of the end of the tax period, or a fine applies — regardless of the tax due being zero.

What happens if revenue exceeds AED 3 million partway through the year?

The threshold is checked based on the tax period as a whole, not at a single point in time. If revenue for the current or preceding period exceeds AED 3 million, the right to SBR for that period is lost and tax is calculated under the standard scheme: 0% on the first AED 375,000 of profit, 9% on the amount above that.

Can a free zone company apply SBR?

An ordinary free zone company — yes, if it meets the revenue condition. The exception is Qualifying Free Zone Persons: a separate 0% relief regime for qualifying income applies to them, and SBR doesn't apply.

Is personal income from salary or rent counted toward the AED 3 million threshold?

No. For individuals, salary, income from personal investments, and income from renting out personally owned real estate (where no licence is required for it) aren't subject to Corporate Tax at all and aren't counted toward the revenue threshold — regardless of SBR.

Until what year can Small Business Relief be used?

The relief applies to tax periods ending before 31 December 2026. Companies that currently qualify should start modelling their tax obligations for periods after that date in advance.

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