In a bid to support small businesses and enhance economic growth, the United Arab Emirates (UAE) has launched a new initiative known as the Small Business Relief program under Article 21 of its Corporate Tax Law. This program aims to ease the tax burden on small and micro-enterprises operating within the UAE.
The Small Business Relief program sets out clear criteria that businesses must meet to qualify. Firstly, businesses must be recognized as resident taxable entities in the UAE. Secondly, their total revenue for both the current and previous tax periods must not exceed AED3,000,000. This threshold, which took effect from June 1, 2023, will be in place until December 31, 2026.
Who can apply, and who cannot
Businesses are required to calculate their revenue using UAE-accepted accounting standards, such as IFRS and IFRS for SMEs. Additionally, businesses must actively choose to apply for Small Business Relief when submitting their annual tax returns. Groups of businesses can also apply for relief if their combined revenue falls within the specified threshold.
However, certain businesses are not eligible for this relief program. This includes companies that are part of multinational enterprises (MNEs) and companies who want to avail 0 percent tax benefit in free zones under the UAE CT law.
Small business relief rules require small businesses to register under corporate tax and use simpler tax filing procedures. However, they cannot carry forward losses to offset future profits.
Compliance mandatory
Businesses that choose to benefit from Small Business Relief must fulfil all compliance obligations outlined in the Corporate Tax Law. This includes registering for corporate tax purposes, submitting simplified tax returns, ensuring transactions comply with the arm’s length principle, and maintaining accurate records to support their tax filings.
The Federal Tax Authority has the authority to verify compliance and may request information or records within specified timelines.
Read | UAE corporate tax: Natural persons and threshold for taxable turnover
In illustrating the practical application of the UAE’s Small Business Relief program, several examples highlight how eligibility criteria affect different businesses.
In Abu Dhabi, Mr. X runs a business and is considered a resident person for tax purposes. Starting his business on January 1, 2025, with a tax year ending on December 31, Mr. X earned AED2,000,000 in revenue during the most recent tax period ending December 31, 2025. He qualifies for Small Business Relief because he is a natural person operating a business that generated revenue less than AED3,000,000. Since this is his first year of operation, Mr. X has not exceeded the revenue threshold in previous periods and must elect to benefit from Small Business Relief when filing his tax return.
The introduction of the Small Business Relief program underscores the UAE’s commitment to nurturing a supportive environment for small enterprises. By reducing tax burdens and minimizing compliance costs, the initiative aims to stimulate innovation, entrepreneurship, and overall economic growth. However, it is crucial for eligible businesses to fully understand the criteria and comply with regulatory obligations to fully benefit from this relief measure. As the business landscape evolves, initiatives like Small Business Relief play a crucial role in driving sustainable development and prosperity within the UAE.
The author is a chartered accountant and a fellow member of the Institute of Chartered Accountants of India. He is the lead author of the book ‘UAE Corporate Tax: A Beginner’s Guide’.
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