UAE Extends Small Business Relief Until 2029

Under Ministerial Decision No. 131 of 29 July 2026, the corporate tax exemption for small businesses in the United Arab Emirates has been extended until 31 December 2029. Originally, this relief applied only to periods ending by the end of 2026.

What is Small Business Relief?

Small Business Relief (SBR) in the UAE is provided for under Article 21 of the Corporate Tax Law of 2022 and applies on an elective basis (i.e., it is not granted automatically). This regime is available to companies and individuals carrying on business that are UAE residents for the purposes of the Corporate Tax Law. The relief can be claimed by both mainland companies and free zone companies in the UAE.

A company that elects for SBR is treated as having no taxable income for the relevant period and therefore has no corporate tax liability. Despite this, such companies must still hold a corporate tax registration (a Tax Registration Number), file tax returns, and be able to demonstrate that the conditions for the relief have been met. The Federal Tax Authority (FTA) is entitled to request relevant information and documents from taxpayers.

Conditions for Claiming Small Business Relief

The main condition for applying the exemption is that the taxpayer’s revenue does not exceed the threshold of AED 3,000,000 in the current and in each preceding tax period. If a company exceeds the revenue threshold, it loses its entitlement to this regime and will not be able to use it again in the future.

This threshold was set for tax periods starting on or after 1 June 2023 (i.e., alongside the introduction of corporate tax in the UAE) and, until now, applied only up to tax periods ending by 31 December 2026. The amendment of July 2026 extends its application for a further three years, to tax periods ending on or before 31 December 2029. The threshold amount itself (AED 3 million) remains unchanged.

Small Business Relief is not available to:

• Qualifying Free Zone Persons (QFZP);
• Constituent companies of Multinational Enterprise (MNE) Groups, as defined in Cabinet Resolution No. 44 of 2020.

Restriction on Tax Loss Carryforward under SBR

Companies that benefit from Small Business Relief in the UAE do not have access to certain rights available to taxpayers who pay corporate tax under the standard (non-relief) regime. In particular, this concerns the restriction on carrying forward tax losses.

Where a taxpayer has elected to apply Small Business Relief in a given tax period, any tax loss incurred during that period cannot be carried forward to any subsequent period (Article 4 of Ministerial Decision No. 73 of 2023).

That said, unused tax losses incurred in earlier periods in which SBR was not applied may be carried forward to subsequent periods (in which SBR is likewise not applied), provided the conditions of Article 37 of the Corporate Tax Law are met.

Small Business Relief and the Zero Rate for QFZPs

It is important to give careful thought to the choice of tax regime, having regard to the company’s current position and future plans. Free zone companies can choose between: 

• QFZP status, in order to benefit from the 0% tax rate in the UAE;
• the standard tax regime, at a rate of 9% on profit above the tax-free threshold;
• Small Business Relief (provided the company does not exceed the revenue threshold).

QFZP (Qualifying Free Zone Person) status requires compliance with a number of conditions, but allows a 0% rate to be applied to qualifying income, which is defined fairly broadly. This regime remains one of the key advantages of UAE free zones as a place to set up a business.

Electing for Small Business Relief reduces a company’s tax liability to zero and significantly simplifies corporate tax filing. However, using SBR limits certain options available to those who do not apply this relief (for example, carrying forward tax losses). Entitlement to SBR is lost permanently if a company’s revenue exceeds AED 3 million in any period. In addition, despite being extended to the end of 2029, this relief remains a temporary measure.

Comparing Small Business Relief and QFZP

SBR and QFZP are mutually exclusive regimes: a company cannot apply both in the same tax period. Their main differences are as follows:

Small Business Relief (SBR)	Zero Rate for Qualifying Free Zone Persons (QFZP)
Available: to both UAE mainland companies and UAE free zone companies.	Available: only to UAE free zone companies.
Nature of the relief: the company is treated as having no taxable income and pays no corporate tax.	Nature of the relief: the company’s “qualifying” income is taxed at a 0% corporate tax rate.
Conditions of use: revenue not exceeding AED 3 million per tax period; no QFZP status.	Conditions of use: compliance with requirements as to activities, income structure, adequate substance, transfer pricing and audit.
Compliance burden: lower than under the standard tax regime or QFZP.	Compliance burden: higher, as it requires compliance with all the conditions for applying the zero rate.
Duration: for tax periods ending on or before 31 December 2029.	Duration: unlimited, for as long as all QFZP requirements continue to be met.

Consequences of Losing QFZP Status

It is worth remembering that if a QFZP decides to move to the standard tax regime (including in order to apply SBR) in a given tax period, it will lose its QFZP status (i.e., will no longer be able to apply the 0% rate on this basis) from the start of that period, as well as for the four subsequent tax periods. This rule should be taken into account when deciding whether to give up QFZP status.

For example, a free zone company that is having difficulty meeting the QFZP requirements in a given period may choose the standard tax regime, under which it claims SBR and files a tax return in a simplified manner. This may be a sound decision, provided the revenue threshold has not been exceeded. In that case, however, the company will not be able to return to the 0% rate as a QFZP for five years (including in case of termination of SBR in the UAE).

Why Does the Extension of SBR in the UAE Matter?

The three-year extension of Small Business Relief in the UAE, to 31 December 2029, is welcome news, above all, for small companies and start-ups, for whom it creates more predictable tax conditions for the near term. Companies with modest revenue will still be able to operate free of corporate tax in the early stages of their business, allowing them to focus on growth.

That said, when choosing between the “standard regime”, Small Business Relief or the zero rate for QFZPs, it is important to weigh up the merits of each option in light of the company’s specific circumstances and plans. Tax consultants at Uniwide are on hand to help you assess the tax reliefs available in your case and choose the most suitable corporate tax structure in the UAE.

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