Understanding Small Business Relief in UAE Corporate Tax: A Practical Guide

Understanding Small Business Relief in UAE Corporate Tax: A Practical Guide

🗓️ November 8, 2025

When the UAE rolled out Corporate Tax in 2023, small businesses and investors had one burning question: “Do we qualify for Small Business Relief (SBR)?”

This scheme can mean the difference between paying 0% tax or the standard 9%. But the rules aren’t always straightforward. Here’s a practical guide, based on the Federal Tax Authority’s SBR framework (CTGSBR1).

What is Small Business Relief (SBR)?

SBR is a concession under Article 21 of the UAE Corporate Tax Law that allows qualifying resident entities to be treated as if they earned no taxable income.

Key benefits:

  • Zero tax payable – keep more cash in the business.

  • Simplified compliance – option to use cash-basis accounting.

  • Growth support – reduces costs for SMEs and encourages foreign investment.

 Important: You must still file a corporate tax return within 9 months of the tax period and elect for SBR each year. It is not automatic.

 Eligibility Criteria

You qualify if:

  • Revenue threshold: ≤ AED 3 million for the current tax period and all prior periods since 1 June 2023.

  • Applicable period: Available for tax years ending between 1 June 2023 and 31 December 2026. After that, businesses must transition into the standard corporate tax regime.

  • Entity type: Open to UAE resident individuals and companies (LLCs, etc.). Free Zone entities qualify only if not claiming Qualifying Free Zone Person (QFZP) 0% benefits.

Example: A Free Zone consultancy providing services that do not meet the QFZP “qualifying activities” test and not claiming 0% benefits may still apply for SBR.

Exclusions:

  • Multinationals with global revenue > AED 3.15 billion.

  • Qualifying Free Zone Persons claiming 0% tax.

  • Entities that opt out voluntarily.

 Compliance Obligations

Even at 0% tax, you must:

  • File returns: Elect SBR in your corporate tax filing. Non-filing can lead to fines up to AED 10,000.

  • Maintain records: Keep proper financial statements under UAE accounting standards for at least 7 years; penalties apply for poor record-keeping.

  • Register with the FTA: All entities must be registered for corporate tax.

 Mistake to avoid: Thinking “no tax = no filing.” Always file to avoid penalties.

 Case Examples

  •  Eligible: Dubai consultancy earns AED 1.8m → SBR applies → 0% tax.

  •  Not eligible: Free Zone IT firm earns AED 3.2m in 2025 → exceeds threshold.

  •  Not eligible: Subsidiary earns AED 2.5m, but parent has AED 3.5b global turnover → multinational group → excluded.

  •  Strategic choice: Trading company earns AED 2.9m → may opt out to carry forward losses and offset future profits.

  •  Eligible (Free Zone): A Free Zone retailer earns AED 2m, is not a QFZP, and is not claiming 0% → eligible for SBR.

 Strategy: Claim vs. Opt Out

SBR isn’t always the best choice.

  • Claiming relief: Ideal if revenue < AED 3m and stability is expected. Downside: no loss carry-forward or foreign tax credits.

  • Opting out: You pay 9% on profits but retain losses, interest deductions (30% EBITDA cap), and foreign tax credits. This may also be relevant for companies with foreign parents who want to make use of double taxation agreements (DTAAs).

 Tip: Forecast revenue and growth before deciding.

 Final Takeaway

SBR can be a powerful tax planning tool for startups and SMEs:

  • Used wisely → protects cash flow and fuels growth.

  • Used carelessly → you may lose valuable deductions later.

 For businesses: Review eligibility and plan ahead, especially beyond Dec 2026.

 For advisors: Translate complex rules into actionable strategies.

 Would you take 0% tax now, or opt out to build a stronger tax position? Share your thoughts below!

Need clarity on UAE Small Business Relief and Corporate Tax? Angel Services helps SMEs and foreign investors navigate tax planning with confidence. Contact us for tailored advice.