Small Business Relief Extended to 2029: What UAE SMEs and Start-ups Need to Know

Good news for UAE entrepreneurs: Small Business Relief (SBR) under UAE Corporate Tax will no longer end in 2026. The Ministry of Finance has issued Ministerial Decision No. 131 of 2026, which extends the relief to tax periods ending on or before 31 December 2029. Eligible businesses with revenue of up to AED 3 million now have three more years of potentially paying no Corporate Tax.

The extension is welcome, but SBR is an election, not an automatic exemption, and it comes with trade-offs many business owners overlook. This guide explains what changed, who qualifies, what you give up by electing, and how to decide whether SBR is right for your business.

Key Takeaways SBR now applies to tax periods ending on or before 31 December 2029 (previously 31 December 2026). The AED 3 million revenue threshold is unchanged and is based on revenue, not profit. Qualifying Free Zone Persons and members of large multinational groups remain excluded. SBR must be elected in the Corporate Tax return for each tax period; registration and filing are still mandatory. Tax losses from SBR years cannot be carried forward, so loss-making start-ups should model the choice carefully.

 

What Has Changed Under Ministerial Decision No. 131 of 2026?

Ministerial Decision No. 73 of 2023 originally made SBR available for tax periods starting on or after 1 June 2023 and ending on or before 31 December 2026. Ministerial Decision No. 131 of 2026 was issued on 29 July 2026 and announced by the Ministry of Finance in early August 2026. It replaces that end date with 31 December 2029.

Nothing else in the relief has changed. The revenue test, the exclusions and the requirement to elect each period all continue as before. Many articles and checklists published earlier in 2026 still state that SBR ends this year, so business owners should make sure their planning reflects the extension.

How Small Business Relief Works

A business that elects SBR for a tax period is treated as having no taxable income for that period, so no Corporate Tax is payable. Businesses using SBR do not need to calculate taxable income, adjust for non-deductible expenses or work through many of the more complex provisions of the Corporate Tax Law. The Corporate Tax return is also simplified.

SBR does not remove compliance obligations. Every eligible business must still register for Corporate Tax, keep proper accounting records, prepare financial statements that support its revenue figure, and file its Corporate Tax return on time.

Who Is Eligible for SBR?

Condition	What It Means in Practice
Resident Person	Available to UAE resident taxable persons, including UAE-incorporated companies and resident individuals carrying on business.
Revenue of AED 3 million or less	Revenue must not exceed AED 3 million in the current tax period and in every previous tax period covered by the relief. Once exceeded, the relief is lost for later periods.
Not a Qualifying Free Zone Person	A free zone company enjoying the 0% QFZP regime cannot also claim SBR.
Not part of a large MNE Group	Members of multinational groups with consolidated revenue above AED 3.15 billion are excluded.
Election made	The business must actively elect SBR in its Corporate Tax return for each tax period.

 

The Revenue Test Is About Turnover, Not Profit

The AED 3 million limit applies to gross revenue as shown in the financial statements, not to profit. A consultancy with AED 2.8 million of revenue and AED 1.5 million of profit can qualify. A trading company with AED 3.2 million of revenue and a small margin cannot.

The look-back rule matters too. If a company recorded revenue of AED 3.4 million in 2025 and AED 2.5 million in 2026, it cannot use SBR for 2026, because the threshold was exceeded in an earlier relevant period.

What You Give Up When You Elect SBR

SBR is valuable, but it is not free. Before electing, consider the following:

• Tax losses are forfeited. Losses incurred in a tax period for which SBR is elected cannot be carried forward to offset future taxable income.
• Disallowed interest cannot be carried forward. Net interest expenditure from SBR periods cannot be used in later periods.
• Artificial splitting is penalised. The FTA can deny the relief and impose penalties where a business is artificially divided to keep each part under AED 3 million.
• The arm's length principle still applies. SBR businesses are not required to prepare transfer pricing documentation, but related party transactions should still be priced on market terms.

Worked Example: When SBR May Not Be the Best Choice

Consider a start-up with revenue of AED 1.8 million and a tax loss of AED 600,000 in 2026. It expects to grow to AED 4 million of revenue and AED 900,000 of taxable profit in 2027.

	Elect SBR in 2026	Do not elect SBR in 2026
2026 Corporate Tax	Nil	Nil (loss year)
Loss carried to 2027	None (forfeited)	AED 600,000
2027 taxable income after losses	AED 900,000	AED 300,000
2027 Corporate Tax	AED 47,250	Nil (within AED 375,000 0% band)

Illustrative only. Loss relief is limited to 75% of taxable income in any period; here the full AED 600,000 can be used because it is below 75% of AED 900,000.

In this case, not electing SBR saves AED 47,250. For profitable small businesses, SBR usually wins. For loss-making businesses expecting rapid growth, the numbers should be run before the return is filed.

Why the Extension Matters for Free Zone Companies

A free zone company that chooses SBR is giving up QFZP treatment. Electing out of the QFZP regime can prevent the business from being treated as a QFZP for the relevant tax period and the following four tax periods. When SBR was due to end in 2026, a free zone company electing it could have been left without either benefit from 2027. The extension to 2029 largely closes that gap, but free zone businesses should still weigh long-term growth plans before moving away from the QFZP regime.

Practical Steps for UAE SMEs

1. Check your revenue history for every tax period since your first Corporate Tax period, not just the current year.
2. Confirm your status: resident person, not a QFZP and not part of a large multinational group.
3. Model the loss position if you expect a loss this year and profits in later years.
4. Keep financial statements and records that clearly support your revenue figure. Businesses with revenue of AED 3 million or less may prepare financial statements on a cash basis.
5. Elect SBR in the return. For calendar-year businesses, the 2025 Corporate Tax return is due by 30 September 2026.
6. Plan for growth. Build proper accounting and tax processes now, so crossing AED 3 million does not cause compliance problems.

How Al Nuaimi Auditors Can Help

Our UAE Corporate Tax team helps SMEs and start-ups confirm SBR eligibility, model whether electing the relief is beneficial, and file accurate Corporate Tax returns. We also provide accounting and bookkeeping services that keep your revenue records audit-ready, and tax consultancy for businesses planning to grow beyond the AED 3 million threshold.

Frequently Asked Questions

Has UAE Small Business Relief been extended?

Yes. Ministerial Decision No. 131 of 2026 extends Small Business Relief to tax periods ending on or before 31 December 2029. It was previously available only for tax periods ending on or before 31 December 2026.

Has the AED 3 million threshold increased?

No. The revenue threshold remains AED 3 million per tax period. It applies to revenue, not profit.

Do I still need to register and file a Corporate Tax return if I claim SBR?

Yes. SBR is claimed through the Corporate Tax return. Registration, record keeping and timely filing remain mandatory, and penalties apply for late registration or filing.

Can a free zone company claim Small Business Relief?

Only if it is not a Qualifying Free Zone Person. A free zone company must give up the QFZP regime to elect SBR, which can affect its QFZP eligibility for future periods.

Can I carry forward losses from a year in which I elected SBR?

No. Tax losses and disallowed net interest expenditure from SBR periods cannot be carried forward, so loss-making businesses should compare both options before electing.

 

Not Sure Whether to Elect Small Business Relief? Our Corporate Tax specialists can review your revenue history, model the impact of the election and file your return correctly. Ahmed Saleh Al Nuaimi Auditors and Accountants Office No. 215, Abdulla Ahmad Mohammed Bin Fahad 4, Al Qusais 2, Dubai, UAE Tel: +971 4 323 1183  |  Mobile: +971 55 899 5971 Email: mail@alnuaimiauditors.com Website: alnuaimiauditors.com/contact

Official Sources

• Ministerial Decision No. 131 of 2026 (mof.gov.ae)
• Ministerial Decision No. 73 of 2023 on Small Business Relief
• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses

Disclaimer: This article is for general information only and reflects UAE legislation and FTA guidance available as at 15 September 2026. It does not constitute tax, legal or audit advice. Specific advice should be obtained before acting on any matter discussed.