UAE Corporate Tax: A Complete Guide to Small Business Relief

Corporate Tax in the UAE has introduced a new chapter for small business owners, and with it, a lot of confusion.

Do I need to pay tax?
Do startups qualify?
What happens if my revenue is low? 

To support entrepreneurs, freelancers, and SMEs, the government introduced Small Business Relief under the UAE Corporate Tax law, a provision designed to ease the financial and compliance burden on early-stage businesses.

In this guide, you’ll find everything clearly explained, like who qualifies for the relief, how it works, what documents you need, and the rules every business owner must keep in mind before applying. Whether you’re preparing for Corporate Tax Registration in the UAE or simply trying to understand your eligibility, this guide simplifies it all for you.

Let’s break it down step-by-step. 

What Is Small Business Relief in the UAE?

Small Business Relief is a special exemption introduced under the new Corporate Tax framework in the UAE. It allows qualifying businesses to be treated as if they have no taxable income, meaning:

• You pay 0% Corporate Tax for that tax period
• You are exempt from certain documentation and compliance requirements

This relief is especially helpful for small enterprises, early-stage companies, freelancers, and startups that are still stabilising their revenue.

The goal is simple. Reduce the financial pressure on small businesses so they can grow faster.

Understanding the UAE Corporate Tax Law

While Small Business Relief is extremely beneficial, it comes with boundaries. Businesses must understand the wider UAE Corporate Tax law to avoid mistakes. The law covers:

• Qualifying vs. non-qualifying income
• Rules for free zones
• Anti-abuse rules
• Excluded activities
• Transfer pricing
• Deadlines & recordkeeping requirements

For complex scenarios, businesses should always seek professional help.

Who Is Eligible for Small Business Relief?

The UAE’s Federal Tax Authority (FTA) has clearly listed who can take advantage of this benefit.

A business can elect for the relief if:

1. It is a Resident Person

This includes:

• Natural persons (individuals running a business)
• Juridical persons (companies)

2. Revenue Must Be AED 3 Million or Less

Your total revenue must be:

• AED 3,000,000 or less in the current tax period, and
• AED 3,000,000 or less in all previous tax periods

If the revenue crosses AED 3 million even once, the business becomes ineligible forever for all future periods, even if revenue later drops again.

3. You Must Elect for the Relief Every Tax Period

It is not automatic. You must actively choose the relief for each period.

Who CANNOT Apply for Small Business Relief?

Even if their revenue is below AED 3 million, some entities are excluded entirely:

❌ Qualifying Free Zone Persons (QFZP)

Companies already benefiting from the 0% Free Zone Corporate Tax regime cannot choose this relief.

❌ Large Multinational Groups

Any company part of a multinational group with global consolidated revenue above AED 3.15 billion cannot elect.

What Benefits Do You Get Under Small Business Relief?

If your business qualifies and elects the relief, the following advantages apply:

1. You Are Treated as Having No Taxable Income

You legally report zero taxable income, resulting in 0% Corporate Tax for that tax period.

2. Reduced Compliance Requirements

Businesses under Small Business Relief are exempt from:

• Detailed transfer pricing documentation
• Extensive tax reporting obligations

You must still follow the Arm’s Length Principle, but you don’t need to prepare full TP files.

Arm’s Length Principle means that all transactions between related entities (like a parent company and its subsidiary, or companies under the same owner) must be conducted as if they were between two completely independent, unrelated parties in an open market. 

3. Lower Admin & Accounting Burden

For small businesses with limited staff and resources, this relief creates breathing room and reduces overall compliance costs.

Key Conditions You Must Follow

Even though your tax liability becomes zero, the FTA still requires proper discipline.

1. Keep Records for 7 Years

Invoices, receipts, contracts, bank statements, and ledgers must be kept for seven years. Digital copies are acceptable.

2. Apply the Relief Correctly

You must declare your choice on your tax return for each period.

3. Ensure Revenue Calculation Is Accurate

You must be able to demonstrate, through records, that your revenue did not exceed AED 3 million.

Why Small Business Relief Matters

The relief is not just a tax benefit; it helps small businesses stay stable while going through growth challenges.

Here’s why it matters:

• Lower tax pressure during early growth years
• More room for investment in operations
• Better cash-flow management
• Freedom to expand without immediate tax impact
• Simplified compliance, zero penalties when done correctly
• Encourages entrepreneurship in the UAE

Small Business Relief was designed to give businesses the space they need to strengthen operations, especially during their foundation years.

Corporate Tax in the UAE: Where Small Business Relief Fits In

With the introduction of Corporate Tax in the UAE, the government created a clear structure for how businesses will be taxed. The general rule is:

• 0% tax on the first AED 375,000 of taxable income
• 9% tax on income above AED 375,000

But Small Business Relief is a separate benefit. If you qualify, the relief overrides this rule for that period, meaning your taxable income becomes “zero” regardless of your actual profit.

This makes the relief one of the most powerful tools available to small businesses.

Corporate Tax Registration in the UAE: Do Small Businesses Still Need to Register?

Yes.
Even if you want to opt for Small Business Relief, UAE Corporate Tax registration is still mandatory for nearly all businesses.

Registration is required even if you will pay 0% tax.

UAE Corporate Tax Rates 

Understanding how Corporate Tax in the UAE is applied helps businesses plan better and stay fully compliant. Here’s a clear breakdown of the current tax structure:

0% Corporate Tax on Income Up to AED 375,000

The first AED 375,000 of taxable income is taxed at 0%, giving small businesses and startups room to grow without immediate tax pressure. This benefit supports early reinvestment and smooth cash flow.
Important: Even with 0% tax, companies must still register, maintain proper records, and file their Corporate Tax return with the FTA.

9% Corporate Tax on Income Above AED 375,000

Any taxable profit exceeding AED 375,000 is taxed at the standard 9% rate. This applies to most Mainland and Free Zone businesses unless they qualify as a QFZP (Qualifying Free Zone Person).
The UAE continues to offer one of the lowest corporate tax rates globally, and careful planning can further optimise your taxable income.

Small Business Relief (0% Tax Until 31 December 2026)

Mainland businesses with revenue below AED 3 million can choose the Small Business Relief scheme. When elected, the business is treated as having no taxable income, reducing its corporate tax to 0%.
However, companies must still:

• File their Corporate Tax return
• Maintain complete financial records
• Ensure the relief aligns with their long-term tax strategy

This relief is designed to help SMEs manage costs and focus on expansion during their early growth stages.

UAE Corporate Tax Penalty

The UAE has introduced strict Corporate Tax penalties to ensure businesses remain compliant with filing, reporting, and registration requirements. These penalties apply under the Federal Tax Authority (FTA) guidelines and are essential for every company to understand, regardless of its taxable income.

1. Fixed Penalties

Businesses can face AED 10,000 for failing to register for Corporate Tax on time. Maintaining proper financial records is also mandatory; non-compliance results in AED 10,000 for a first offence and AED 20,000 for repeated offences. Not cooperating with a tax audit can lead to a AED 20,000 penalty.

2. Late Return Filing

If a Corporate Tax return is submitted late, businesses are charged monthly penalties: AED 500 per month for the first 12 months, increasing to AED 1,000 per month thereafter.

3. Incorrect or Unpaid Tax

Late payment triggers 14% annual interest on unpaid tax. Filing incorrect returns can lead to penalties of 15% of the tax difference, plus monthly fines, which are lower if the business voluntarily discloses the error.

These penalties highlight the need for timely Corporate Tax registration, accurate bookkeeping, and proper filing to avoid unnecessary financial and legal risks.

Note: The penalties mentioned are key examples under the UAE Corporate Tax rules. Additional fines and sanctions may apply depending on specific non-compliance issues. Always consult a certified tax professional to ensure full compliance and avoid penalties.

Conclusion

Small Business Relief is one of the most supportive measures introduced under the UAE’s new tax system. If your revenue remains under AED 3 million, and you meet all eligibility rules, the relief can:

• Remove your tax burden
• Reduce compliance requirements
• Make cash-flow management easier
• Give you time to stabilise and grow

However, you must apply it correctly, keep proper records, and stay aligned with the requirements of Corporate Tax in the UAE.

If you follow the rules, this relief becomes a powerful advantage for small businesses working toward long-term success.

Many businesses in the UAE qualify for tax reliefs but often miss out simply because they aren’t aware of the rules or eligibility criteria. Vista Financials Accounting and Taxation helps bridge that gap by guiding companies through the complexity of Corporate Tax in the UAE. 

Our experienced tax consultants ensure you understand your obligations clearly and make the most of every relief, exemption, and benefit available to your business. With our expertise, you stay compliant, informed, and confidently positioned to minimise your tax burden.

FAQs

What is Corporate Tax Small Business Relief in the UAE?

Small Business Relief (SBR) is a special provision introduced under the UAE Corporate Tax Law to support startups and SMEs. It allows eligible Resident Persons with annual revenue up to AED 3 million to be treated as having zero taxable income for that tax period. As a result, the business pays 0% Corporate Tax, reducing both compliance pressure and administrative workload.

How long can a company claim Small Business Relief in the UAE?

A business can apply SBR to tax periods ending on or before 31 December 2026. This offers temporary relief from the standard Corporate Tax in the UAE. However, if the business exceeds the AED 3 million revenue limit even once during any tax period leading up to 31 December 2026, it becomes permanently ineligible for SBR in all current and future periods, as specified in the UAE Corporate Tax Law.

Do I need to maintain financial records if I claim Small Business Relief?

Yes. Record-keeping remains mandatory under the UAE Corporate Tax Law. Businesses must keep financial statements, invoices, contracts, and all supporting documents for a minimum of seven years from the end of the tax period. Not maintaining proper records, despite having 0% tax liability, counts as non-compliance and may result in a UAE Corporate Tax penalty, starting at AED 500 and increasing.

Do I need to complete tax registration and filing even when using the relief?

Yes. Corporate Tax registration in the UAE is compulsory for all businesses that fall under the law, even if they plan to elect Small Business Relief. The relief is not automatically applied. You must specifically elect SBR within your Corporate Tax return for each eligible tax period. 

What are the key requirements to qualify for Small Business Relief (SBRR)?

To qualify for SBR, a business must meet the following conditions:

1. The business must be a Resident Person (individual or company).
2. Annual revenue must be AED 3 million or below in the current and all preceding tax periods ending on or before 31 December 2026.
3. The business cannot be a Qualifying Free Zone Person or part of a large multinational enterprise group.

Meeting these criteria is essential to benefit from the Small Business Relief provided under the UAE Corporate Tax Law.

Disclaimer: This article provides general information on UAE Corporate Tax and Small Business Relief. It should not be treated as professional tax advice. Always check the latest FTA guidelines or consult a qualified tax consultant for decisions specific to your business.