Small Business Relief in the UAE — Now Extended to 2029

Small Business Relief lets any UAE resident business with revenue of AED 3,000,000 or less elect to be treated as having no taxable income at all — a corporate tax bill of exactly zero. It was due to expire at the end of 2026. Ministerial Decision No. 131 of 2026, signed on 29 July 2026, extended it to tax periods ending on or before 31 December 2029.

We file corporate tax returns for small businesses every month, and the pattern is consistent: about half of eligible founders don't know the relief exists, and half of those who do assume it applies automatically. It doesn't. It's an election you make inside your tax return, period by period, and there are conditions that disqualify you permanently if you trip them. Here's the full picture — including why the extension is no reason to stop preparing for life after it.

How the relief works

UAE federal corporate tax charges 9% on taxable income above AED 375,000, with 0% below that line. Small Business Relief — Article 21 of the Corporate Tax Law, implemented through Ministerial Decision No. 73 of 2023 and extended by Ministerial Decision No. 131 of 2026 — goes further. If your revenue stays at or under AED 3,000,000, you can elect to be treated as having no taxable income whatsoever for that period.

The difference is real money. A company billing AED 2.8 million with AED 900,000 in profit would normally owe 9% on AED 525,000 — that's AED 47,250. With the relief elected: nothing.

Eligibility: four tests, all mandatory

1. You must be a Resident Person — a company incorporated in the UAE (mainland or free zone) or a natural person running a business here.
2. Revenue of AED 3,000,000 or less in the current tax period and every previous one. Cross the threshold once — even back in 2024 — and you're out for good. Revenue means gross turnover, not profit.
3. You must not be a Qualifying Free Zone Person. The 0% free zone regime and Small Business Relief are mutually exclusive. For a small operation, the relief is nearly always the simpler, safer pick.
4. You must not belong to a multinational group subject to country-by-country reporting (consolidated revenue above AED 3.15 billion).

Test 2 is where most businesses stumble. An agency invoicing AED 3.1 million on a AED 200,000 margin fails it. Turnover is what counts, not what's left over.

What it's worth: four worked examples

Tax computed as 9% × (taxable income − AED 375,000). The last row is the trap we see most often: AED 200,000 of extra revenue, and the election is off the table — this year and permanently.

Claiming it: three steps people skip

The relief removes the tax bill, not the paperwork. You still have to:

• Register for corporate tax on EmaraTax. The election lives inside a tax return; no registration means no return, and no relief. Late registration carries an AED 10,000 penalty.
• File your annual return within 9 months of your financial year-end and tick the Small Business Relief election. The FTA offers a simplified return for relief claimants — but a simplified return is still a return.
• Keep books that prove your revenue. In an audit, the FTA tests the AED 3 million threshold against your records, not your word.

Miss a filing or payment deadline and you fall into the penalty regime that took effect on 14 April 2026, including 14% annual interest on late payments. We've broken down the full schedule in our guide to UAE tax penalties in 2026.

The artificial-splitting rule

The FTA anticipated the founder who splits one business into three companies to stay under AED 3 million each. That's artificial separation, and the general anti-abuse rules apply: the relief gets clawed back, with penalties on top. Separate entities with genuinely distinct commercial purposes are fine. Three companies invoicing the same clients for the same work are not.

The trade-off nobody reads about

Electing the relief costs you two things:

• Tax losses can't be carried forward. A loss made in a relief period is gone forever — it will never offset future profits. If the year looks like a loss-making one, electing the relief means throwing that loss away. Sometimes the smarter move is to skip the election and bank the loss against a year when you will actually pay tax.
• Excess interest deductions can't be carried forward either. Same logic, same permanence.

For a profitable company the election is obvious. For a loss-making or heavily leveraged one, run the numbers first.

A real file from this quarter

A client came to us in May 2026: e-commerce founder, free zone company incorporated in 2024, revenue AED 1.9 million in 2024 and AED 2.6 million in 2025, no corporate tax registration, no returns filed. The instinct was panic. The arithmetic was kinder: both years qualified for the relief, so the underlying tax was zero — but the missed registration and late returns still carried penalties, which we worked to reduce through the FTA's channels. Net result: a four-figure penalty bill instead of the AED 90,000+ of tax he feared, and a company now filing on time. The lesson isn't that the FTA is forgiving. It's that the relief only protects people who show up and claim it — and that showing up late costs less than not showing up at all.

The extension to 2029: what the text actually says

Ministerial Decision No. 73 of 2023 ended the relief at tax periods closing on or before 31 December 2026. Ministerial Decision No. 131 of 2026, signed on 29 July 2026 by the Minister of State for Financial Affairs, replaced that clause: the AED 3M threshold "shall continue to apply to subsequent Tax Periods that end on or before 31 December 2029."

In practice:

• Calendar-year companies (the vast majority): financial years 2026, 2027, 2028 and 2029 are all eligible. The 2029 election goes into the return due by 30 September 2030.
• Non-calendar year-ends: a company closing on 31 March has April 2028 – March 2029 as its last eligible period. The following year ends 31 March 2030 — past the cutoff. What matters is the closing date, never the opening one.

Nothing else moved: the AED 3,000,000 threshold, the exclusions (QFZP, multinational groups) and the need to elect the relief in every return are unchanged.

For tax periods ending after 31 December 2029, standard rules apply to everyone: 0% up to AED 375,000 of profit, 9% above. For a typical profitable small business, that's AED 20,000–65,000 of annual tax. Three years is comfortable — and it is also exactly how long it takes to build the accounting habits that make the first taxed year uneventful.

Getting ready for life after the relief

Three moves we're making with clients right now:

• Separate business from personal spending. The day the relief ends, every expense you deduct must survive scrutiny. Mixed accounts that "don't matter" under the relief become audit risk.
• Document your owner salary. Pay you take as a director is deductible if it reflects market value. Set it and paper it before your first taxed period.
• Provision for the tax. Setting aside 9% of profit above AED 375,000 each quarter beats a lump-sum payment nine months after year-end. Our full obligations calendar is in the Dubai tax compliance guide.

One more thing: AED 375,000 is also the mandatory VAT registration threshold. Same number, different tax, different rules — see our VAT in Dubai guide if your turnover is heading that way.

If your year qualifies, claiming the relief is the cheapest tax planning you'll ever do. Amary's accountants confirm your eligibility, file the election with your return and build the plan for the year the relief finally runs out — full bookkeeping and tax compliance from AED 699/month, with a dedicated accountant a WhatsApp message away. Book a free call before your year closes.