Small Business Relief: We Are Under AED 3 Million — Do We Still Have to File?
Yes. That is the first thing to know about Small Business Relief, and the one most often got wrong. The relief removes the corporate tax charge for a period; it does not remove registration, bookkeeping or the tax return. What it does do is worth having: a company that qualifies is treated as having no taxable income for the period, and the return is filed in simplified form.
The relief in one paragraph
A UAE resident company with revenue of no more than AED 3 million in the current tax period, and in every previous tax period, may elect Small Business Relief in its return. It was originally due to expire at the end of 2026; Ministerial Decision No. 131 of 2026 extended it to tax periods ending on or before 31 December 2029, as announced by the Ministry of Finance on 7 August 2026. The threshold was not changed.
Who is excluded
- A Qualifying Free Zone Person. A free zone company chooses between QFZP status and the relief; it cannot hold both
- A constituent entity of a large multinational group. The relief is aimed at genuinely small standalone businesses, not at small entities inside large groups
- Any company whose revenue exceeded AED 3 million in any earlier period. One breach in the past closes the door permanently, even if revenue later falls
The last point is the one that catches growing businesses. A company that made AED 3.2 million two years ago and AED 2 million this year does not qualify this year.
What you give up
The relief is not free. For a period in which it is applied:
- Tax losses cannot be carried forward. A loss-making year under the relief is a loss you never use
- Certain deductions and carry-forwards, such as unused interest capacity, are not accumulated
- You still bear the full cost of compliance: books, return, and any audit the zone requires
For a start-up that expects losses in years one and two and profit from year three, electing the relief in the loss years can be the wrong call: the losses would have sheltered later profit at 9%.
The arithmetic against the standard regime
Under the standard rules, 0% applies to the first AED 375,000 of taxable income and 9% above that. A company with AED 2.5 million of revenue and AED 500,000 of taxable profit would pay 9% on AED 125,000 — AED 11,250. With the relief it pays nothing. The saving is real but modest at that scale; it grows with margin. A company with AED 2.9 million of revenue and AED 1.5 million of profit saves 9% on AED 1,125,000, which is AED 101,250. Run your own numbers before deciding, because the loss carry-forward you give up may be worth more.
How to elect it
- Register for corporate tax with the FTA through EmaraTax. The penalty for missing the registration deadline is AED 10,000, relief or no relief.
- Compute revenue for the period on the accounting basis, not from bank receipts.
- Confirm revenue in every earlier period was also at or below AED 3 million.
- Confirm the company is not a QFZP and not part of an excluded group.
- Tick the election in the return for the period and file on time: a return not filed costs AED 500 per month for the first twelve months and AED 1,000 per month after that.
- Keep the records that prove revenue: in an audit the burden is yours.
Splitting the business does not work
The FTA has a general anti-abuse rule. Dividing one business into three companies so that each shows AED 2.9 million of revenue is exactly the pattern the rule targets, and the relief can be denied with penalties. Genuine separate businesses under common ownership are a different matter, but the separation has to be real: different activities, contracts, staff and customers.
The 2029 horizon
Treat the extension as a deferral. Model the business as: relief through the last period ending by 31 December 2029, then the standard regime. If the company will by then be near the threshold anyway, set the accounting up for the standard regime now. If the difference is material, decisions about structure take months, so they are made in 2027 or 2028, not in the last quarter of 2029. Do not build on the assumption of another extension.
VAT is a separate question
The relief concerns corporate tax only. VAT at 5% applies regardless, with mandatory registration once taxable supplies exceed AED 375,000 in 12 months and voluntary registration available from AED 187,500. A company under the corporate tax relief is very often above the VAT threshold.
Frequently asked questions
Can we elect the relief for some periods and not others?
The election is made period by period in the return. Each period stands on its own, subject to the revenue history condition.
Does the relief apply automatically if we are under the threshold?
No. It must be elected in the return. If the box is not ticked, the standard rules apply for that period.
What happens after 2029?
Under the current rules, the standard regime. If it is extended again, we will update this article with the verification date.
This is a general framework, not legal advice. UAE law changes, and procedures differ between emirates and free zones. We review each situation individually.