UAE resident businesses with revenue of AED 3,000,000 or less can elect to pay zero corporate tax — but only for tax periods ending on or before 31 December 2026. From your first tax period ending after that date, the standard regime applies: 0% on taxable income up to AED 375,000, and 9% on everything above it. This guide shows how to model that first full 9% year before it starts.
Small Business Relief is an election under Article 21 of the UAE Corporate Tax Law, implemented by Ministerial Decision No. 73 of 2023. A UAE resident person — juridical or natural — whose revenue is AED 3,000,000 or less in the relevant tax period and every previous tax period can elect to be treated as having no taxable income for that period. The result: no corporate tax to pay, no taxable-income calculation, a simplified tax return, and the option to prepare financial statements on the cash basis of accounting.
Three details matter for planning. The test is revenue, not profit — gross income determined under accepted accounting standards. The election is made in the tax return each period; it is not automatic, and registration is still mandatory. And the relief is explicitly temporary: it applies only to tax periods that began on or after 1 June 2023 and end on or before 31 December 2026. As of June 2026, no extension has been announced.
Eligibility rests on two cumulative conditions: the business must be a UAE resident person for corporate tax purposes, and its revenue must not exceed AED 3,000,000 in the relevant tax period or in any previous tax period. The threshold is a one-way door — cross it once, even in a single strong year, and the business is permanently ineligible, regardless of where revenue lands afterwards.
Two categories are excluded outright under Article 3 of Ministerial Decision No. 73 of 2023:
There is also an anti-abuse rule: artificially splitting one business across several entities to keep each under AED 3,000,000 is treated as an arrangement to obtain a corporate tax advantage under the general anti-abuse provision, with back taxes and penalties to repay.
The mechanics, not the rate, are what catch businesses out. Once your tax periods stop qualifying, you move from "elect and file a simplified return" to the full regime: calculating taxable income from accounting profit, applying adjustments, filing a complete return, and paying 9% on taxable income above AED 375,000. For a calendar-year business, FY2026 is the last relief year and FY2027 is the first full 9% year. Note the trap for non-calendar year-ends: a tax period running, say, 1 April 2026 to 31 March 2027 ends after the cutoff — it gets no relief at all, so the 9% regime may bite earlier than you think.
Final tax period that can use Small Business Relief closes. For calendar-year filers, this is FY2026.
FY2027 opens under the standard regime. Tax accrues against profit from month one, even though no cash leaves yet.
FY2026 return due within nine months of period end — the last chance to elect the relief.
FY2027 return and corporate tax payment due. Roughly 21 months of accrued tax settles in one outflow.
Take a Dubai services business with AED 2,800,000 of revenue and AED 700,000 of accounting profit — safely under the AED 3,000,000 ceiling, so it elects the relief through FY2026. Here is the same year, before and after the transition:
| P&L line (AED) | FY2026 — SBR elected | FY2027 — standard regime |
|---|---|---|
| Revenue | 2,800,000 | 2,800,000 |
| Operating costs | (2,100,000) | (2,100,000) |
| Accounting profit | 700,000 | 700,000 |
| Taxable income | Not calculated — election | 700,000* |
| Tax at 0% — first 375,000 | — | 0 |
| Tax at 9% — remaining 325,000 | — | 29,250 |
| Corporate tax payable | 0 | 29,250 |
| Profit after tax | 700,000 | 670,750 |
*Assumes taxable income equals accounting profit. In practice, adjustments — disallowed expenses, exempt income, the 50% entertainment cap — move this number. Model them explicitly.
The P&L hit is AED 29,250 — an effective rate of about 4.2% on profit, or roughly 1% of revenue. Manageable. The cash-flow modeling point is timing: that tax accrues at about AED 2,440 per month through FY2027, but the cash leaves in a single payment by 30 September 2028. A forecast that books the expense monthly and the outflow once — alongside any FY2026 catch-up — shows the true runway. One that ignores it overstates distributable cash for nearly two years.
This is the most overlooked trade-off in the regime. If you elect Small Business Relief in a tax period, any tax losses incurred in that period cannot be carried forward — they are simply forfeited. The same applies to net interest expenditure above the deduction limits. For a loss-making startup, electing the relief can therefore destroy a future tax shield worth 9% of those losses against post-2026 profits.
Losses and excess interest from periods where you did not elect carry forward as normal, usable in later non-relief periods subject to the Corporate Tax Law's offset conditions. The H2 2026 decision is genuinely two-sided: profitable businesses should elect for FY2026 without hesitation; loss-making ones should model both paths before signing the return.
Six months is enough — if the work starts now. The goal is to enter January 2027 with a forecast that already carries the tax line, not to discover it at filing time in 2028.
Map your financial year against the 31 December 2026 cutoff and check the revenue test for every period since 2023 — one breach ends eligibility.
Forecast taxable income from accounting profit, apply 0%/9% banding, and pressure-test margin scenarios — bear, base, bull.
Schedule the September 2028 payment in your cash forecast and decide whether to reserve monthly into a separate tax account.
If FY2026 looks loss-making, quantify the carried-forward shield you would forfeit by electing — then choose deliberately.
Move to accrual-ready bookkeeping for the full return, and test whether a 1–2% price adjustment absorbs the tax without losing volume.
Finrise builds the numbers behind this decision, not the tax filing itself. A 3-statement financial model gives you a FY2027 P&L with the corporate tax schedule built in — taxable-income bridge, 0%/9% banding, and sensitivity tables showing what the liability does at different margins. A cash-flow model times the September 2028 payment against your working-capital cycle, so the outflow never surprises your runway.
If revenue is hovering near the AED 3,000,000 ceiling, revenue forecasting shows when you are likely to cross it — and what each scenario means for your final relief election. And for businesses that want ongoing ownership of the transition, our fractional CFO engagement manages the forecast, the tax reserve, and the board conversation through 2027. Your tax adviser confirms the position; we make sure the model already reflects it.
Reserve a 15-minute introductory call. We'll scope a forecast that carries the tax line from day one — and you'll leave with a clear plan.
Schedule a Free Consultation →It applies only to tax periods ending on or before 31 December 2026. For a January–December financial year, FY2026 is the last eligible period, with the final election made in the return due by 30 September 2027. A period ending after the cutoff — say, to 31 March 2027 — cannot use the relief at all.
As of June 2026, neither the Ministry of Finance nor the FTA has announced an extension. The relief was designed as a transitional measure. Prudent planning treats 31 December 2026 as final — if an extension comes, your forecast simply improves.
Revenue — gross income for the tax period, determined under accepted accounting standards. Profit is irrelevant to eligibility. The test also covers every previous period: exceed AED 3,000,000 once and the business is permanently ineligible, even if revenue later falls back below the line.
The first AED 375,000 of taxable income is taxed at 0%, the rest at 9%. On AED 700,000 of taxable income, that's 9% × AED 325,000 = AED 29,250 — about 4.2% effective on profit. Taxable income starts from accounting profit, then adjusts for disallowed expenses and exempt income.
Qualifying Free Zone Persons cannot — they already get a 0% rate on Qualifying Income and are excluded by Ministerial Decision No. 73 of 2023. A free zone entity that is not a QFZP, and is a UAE resident with revenue of AED 3,000,000 or less in all periods, can elect.
Yes. Registration for corporate tax remains mandatory, and the relief is claimed by election in the tax return each period — it is not automatic. Electing businesses file a simplified return, skip the taxable-income calculation, and may keep accounts on a cash basis.
Published 12 June 2026. Sources: Ministerial Decision No. 73 of 2023 (Ministry of Finance); FTA Corporate Tax Guide on Small Business Relief, CTGSBR1; Cabinet Decision No. 116 of 2022. This article is general information, not tax, legal, or accounting advice — confirm your position with a registered UAE tax adviser. See our disclaimer.
