🔍 Article overview
|
| The Small Business Relief in the United Arab Emirates has been extended until December 31, 2029 by Ministerial Decision No. 131, published on August 7, 2026. This scheme allows eligible businesses whose turnover does not exceed AED 3 million per tax period to elect to be treated as having no taxable income for the relevant period. The threshold and main eligibility conditions remain unchanged. However, businesses must continue to register with the FTA, file their corporate tax return on time, and elect the Small Business Relief in each relevant return. Qualifying Free Zone Persons and certain businesses belonging to large multinational groups cannot benefit from the scheme. |
The
Small Business Relief scheme has been granted an additional period in the United Arab Emirates. On August 7, 2026, the Ministry of Finance published
Ministerial Decision No. 131, extending this tax relief scheme until
December 31, 2029.
Initially, the Small Business Relief was due to end on December 31, 2026. This three-year extension therefore gives small businesses, entrepreneurs, and startups established in the United Arab Emirates greater certainty.
The principle remains simple: when a business meets the required conditions and its turnover does not exceed
AED 3 million during a tax period, it can elect to benefit from the Small Business Relief. It is then treated as having no taxable income for that period.
What is the Small Business Relief in the United Arab Emirates?
The Small Business Relief was introduced as part of the United Arab Emirates corporate tax framework, particularly to ease the tax and administrative obligations of small businesses.
When an eligible business generates turnover of less than or equal to
AED 3 million for the relevant tax period, it can opt for this scheme. It is then treated as having no taxable income for that period. In practice, its corporate tax is zero and its filing obligations are simplified.
The scheme can apply to businesses established in the
Mainland as well as those located in a
Free Zone, provided they meet all the eligibility criteria set out in the regulations.
However, this is not an automatic exemption. The business must elect to benefit from the scheme in its tax return.
What Ministerial Decision No. 131 changes
The main change concerns the duration of the scheme.
Before the publication of Ministerial Decision No. 131, the Small Business Relief was available for tax periods ending no later than
December 31, 2026. This deadline has now been extended to
December 31, 2029.
The other key elements remain unchanged.
The annual threshold remains set at
AED 3 million in turnover. The eligibility criteria also continue to apply, as does the requirement to elect the Small Business Relief in the tax return.
A business meeting the conditions can therefore continue to benefit from the scheme for the relevant tax periods through the end of 2029.
Which businesses can benefit from the Small Business Relief?
Several conditions must be met.
First, the business's turnover for the relevant tax period and for the preceding tax periods must not exceed
AED 3 million per period.
The business must also be considered a
tax resident person in the United Arab Emirates. This may include an individual carrying out a business activity or a legal entity incorporated or effectively managed in the United Arab Emirates.
However, certain businesses are excluded.
A company that already has
Qualifying Free Zone Person status, and therefore benefits from the 0% corporate tax regime applicable to qualifying Free Zone income, cannot combine this benefit with the Small Business Relief.
Businesses belonging to a multinational group whose consolidated turnover exceeds
AED 3.15 billion are also excluded from the scheme.
Why this extension until 2029 matters
For small businesses, this decision primarily provides greater certainty.
A company whose turnover remains below the AED 3 million threshold can now factor the possibility of benefiting from the Small Business Relief into its tax planning through the end of 2029. For entrepreneurs, this makes cash-flow forecasting and budget preparation easier.
The extension also gives startups and growing businesses more time to develop their activities before fully bearing the obligations associated with corporate tax. As long as the conditions are met, they can continue to reinvest their resources in growth without incurring corporate tax for the periods in which the Small Business Relief is validly elected.
Another benefit is simplified filing obligations. This can reduce the administrative burden and compliance costs, which are particularly significant for small businesses.
This measure affects a vital segment of the Emirati economy. According to government data cited when the announcement was made, SMEs account for more than
94% of businesses in the United Arab Emirates and contribute more than
60% of the country's non-oil GDP.
Small Business Relief does not mean an absence of tax obligations
The extension of the scheme does not exempt businesses from complying with their main tax obligations.
Even when a business meets the Small Business Relief criteria, it must in particular be
registered for corporate tax with the Federal Tax Authority (FTA) if this has not yet been done.
It must also file its corporate tax return within
nine months after the end of its tax period.
Most importantly, the Small Business Relief must be elected in each relevant tax return. The benefit of the scheme is therefore not granted automatically from one year to the next.
The business must also retain the necessary accounting records, even if it benefits from simplified obligations.
Finally, the Small Business Relief concerns corporate tax and does not replace VAT obligations. When a business exceeds the applicable threshold of
AED 375,000 in taxable supplies, its VAT obligations continue to apply separately.
Extended tax certainty for small businesses
Ministerial Decision No. 131 does not change how the Small Business Relief operates. It mainly extends its duration by an additional three years.
For eligible businesses, the threshold remains set at
AED 3 million in turnover, the criteria remain the same, and the election must still be made in the tax return.
The difference is nevertheless significant: tax periods ending on or before
December 31, 2029 can now fall within the scope of the scheme.
For small businesses and startups in the United Arab Emirates, this extension therefore provides more time to grow, greater tax certainty, and lighter compliance obligations, provided they continue to strictly meet the prescribed criteria and deadlines.
