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ReadWhen the UAE introduced corporate tax in 2023, it built in a cushion for the smallest businesses. Small business relief lets a qualifying company with revenue of up to AED 3 million, roughly US$817,000, elect to be treated as having no taxable income for the year. In practice, that means a corporate tax bill of zero.
The relief was set to expire with tax periods ending on or before 31 December 2026. Today, August 7, 2026, the Ministry of Finance announced that it will run three years longer.
What has changed
Ministerial Decision No. 131 of 2026 amends the earlier rules so that small business relief can be claimed for tax periods ending on or before 31 December 2029. The AED 3 million revenue threshold set in Ministerial Decision No. 73 of 2023 stays the same and now applies across the extended period.
Nothing else about how the relief works has been announced as changing. It remains an election, not an automatic exemption, and the Federal Tax Authority, the agency that administers corporate tax in the UAE, had already published a bulletin on the relief in late July.
How the relief works
- Who can use it. A business that is a UAE tax resident, including companies set up in the UAE and individuals running a business there, whose revenue for the relevant tax period and each earlier period does not exceed AED 3 million.
- What it does. The business is treated as having no taxable income for that period. Without it, the standard regime taxes the first AED 375,000 of taxable profit at 0% and anything above that at 9%.
- What it does not do. It does not remove the need to register for corporate tax, file an annual return and keep proper records. The election is made in the return.
- Losses. Tax losses arising in a year when the relief is claimed cannot be carried forward to later years.
- Anti abuse. Splitting one business into several smaller ones to stay under the threshold can be challenged under the general anti abuse rules in the corporate tax law.
Who cannot use it
Two groups are excluded whatever their revenue. The first is the qualifying free zone person, a company in one of the UAE's free zones that meets the conditions to pay 0% on its qualifying income, broadly income from dealings with other free zone businesses and from certain listed activities. Such a company has its own regime and cannot also claim small business relief. The second is any member of a multinational group with consolidated revenue above AED 3.15 billion.
This matters for founders choosing where to set up. A small consulting or online business in a free zone may find that the general 0% band on the first AED 375,000 of profit, or small business relief through a mainland company, is simpler than meeting every condition for free zone treatment. The right answer depends on who the customers are and where the work is done.
What founders should consider
- Elect or not. A start up that expects early losses may be better off not electing, so the losses can be carried forward against future profits.
- Watch the threshold. Revenue, not profit, is the test. A business with thin margins can cross AED 3 million quickly.
- Keep filing. Missing registration or returns can bring penalties even where no tax would be due.
- Look beyond the UAE. A UAE company does not decide where its owner is taxed personally. Home country rules on residence and controlled foreign companies can still apply.
What it means if you are considering the UAE
For someone starting out, the extension adds certainty. A small UAE company can now plan on paying no corporate tax on revenue up to AED 3 million until the end of 2029, provided it registers, files and makes the election each year. Above that level, the 9% rate on profit over AED 375,000 is still low by international standards.
A company is often the simplest route to UAE residency as well, because it can sponsor its owner for a two year residence visa. We set up companies with our local team in the UAE, whose licensed tax advisers can review your position, and quote our fees in writing.
This article is general information, not legal, tax or investment advice.
