Who Qualifies for Small Business Relief in the UAE
- 01.08.2026
- Posted by: Uwe Hohmann
- Categories: Tax, Dubai
The UAE CIT (Corporate Income Tax) regime includes a relief that allows smaller companies to pay nothing on their profits.
SBR (Small Business Relief) is set out in Article 21 of FDL (Federal Decree Law) 47 of 2022, with the detailed conditions in MD (Ministerial Decision) 73 of 2023.
The mechanism is simple, but the eligibility rules are stricter than many business owners assume.
What Small Business Relief Actually Does
A qualifying Taxable Person that elects SBR is treated as having no taxable income for that Tax Period. The result is a 0% CIT liability regardless of the profit actually earned during the year.
The important word is “elects”, which means this is not an automatic exemption.
A company that meets every condition but does not make the election in its tax filing will be taxed in the ordinary way. Eligibility and entitlement are two different things, and the difference is a check box on the filing.
The Three Conditions for Eligibility
All three must be satisfied.
- Revenue must not exceed AED 3,000,000 in the relevant Tax Period, and it must not have exceeded AED 3,000,000 in any previous Tax Period. That second limb is the one that catches people. Once a company has crossed the threshold in any single period, relief is closed off permanently, even if revenue falls back below AED 3,000,000 in later years. A business trading close to the line should model this before allowing one strong year to shut the door for good.
- The entity must be a Resident Taxable Person under Article 3 of MD 73. Non-resident persons are outside the scope, including those with a presence in the UAE only through a Permanent Establishment.
- A Resident Person cannot elect SBR if it is a Constituent Company of an MNE (Multinational Enterprise) Group as defined in Cabinet Decision 44 of 2020, or if it is a QFZP (Qualifying Free Zone Person). Group membership and free zone status are therefore worth confirming before any planning is built around the relief.
Free Zone Companies and the QFZP Restriction
Under Article 3(2) of MD 73, a free zone company holding QFZP status cannot claim SBR. The logic is that it already benefits from the 0% rate on its Qualifying Income and is not intended to hold two reliefs at once.
A free zone company that does not meet the QFZP conditions is in a different position. Because it is taxed at the standard 9% rate, it can elect SBR, provided revenue has stayed within AED 3,000,000 and it is not part of an MNE Group. Mainland companies below the threshold face no authority-specific restriction at all.
The Threshold Has an Expiry Date
The AED 3,000,000 threshold applies to Tax Periods commencing on or after 01.06.2023, and continues to apply only to subsequent Tax Periods ending on or before 31.12.2026. Beyond that date, a new threshold has to be set by Ministerial Decision.
Nothing has been confirmed for the periods that follow. Companies that treat SBR as a fixed feature of their tax planning should watch for an extension or amendment during 2026 rather than assuming continuity.
The Trade-Offs Worth Checking Before You Elect
Electing SBR is not automatically the better outcome. Any tax losses incurred in a Tax Period where the relief is claimed cannot be carried forward to later periods. The same applies to Net Interest Expenditure arising in an SBR period.
Balances built up before the election survive. Unutilised losses from earlier non-SBR periods may still be carried forward under Article 37 of the CIT Law, and unutilised interest carry-forwards remain available under Article 30, in both cases for use in future non-SBR periods.
For a loss-making company, or one carrying meaningful financing costs, the carry-forward value surrendered can exceed the tax saved, particularly where strong profits are expected within the next few years.
Splitting a Business Is Not a Workaround
Separating a single business across several entities so that each stays below AED 3,000,000 is treated as an arrangement to obtain a Corporate Tax advantage under Article 50 of the CIT Law. The FTA (Federal Tax Authority) will look at the financial, economic and organisational links between the persons involved when deciding whether the separation reflects commercial reality or exists only to secure the relief. Structures that were genuinely separate before the CIT regime began are far easier to defend than structures created in response to it.
What This Means for Your Business
SBR is valuable for genuinely small resident companies, but it is narrow, it is elective, and the current threshold has a stated end point of 31.12.2026. The three questions to settle each year are whether revenue has ever exceeded AED 3,000,000, whether QFZP or MNE Group status applies, and whether the losses and interest given up are worth more than the tax saved.
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