The UAE Federal Tax Authority (FTA) has released a comprehensive guide on Small Business Relief (CTGSBR1), a program designed to ease the implementation of the Corporate Tax regime for qualifying businesses. This guide delves into the crucial aspects of this relief, empowering small businesses to navigate the early stages of the tax system with ease.
According to the businesses, they often face difficulties whenever the new guide is being released by the Federal Tax Authority. That is why expert tax services providers guide the business about the new tax updates.
- Guides can be lengthy and technical.
- They can be time-consuming and frustrating.
- Changes or modifications to existing regulations.
- It can bring confusion and misinterpretations.
This guide explains the overviews these following major topics:
- The introduction of Small Business Relief
- Eligibility criteria
- How it works
- How long it is available
- Related compliance requirements
Key Benefits of Small Business Relief:
Reduced Compliance Burden: Small businesses can skip the cumbersome tasks of calculating taxable income and filing full tax returns. This allows them to focus on growth and operations.
Tax-Free Period: Until December 31, 2026, eligible businesses with annual revenue below AED 3 million can effectively operate tax-free. This translates to significant financial savings and reduced stress.
Simplified Record-Keeping: Businesses can adopt cash-based accounting, further simplifying their financial management.
Eligibility Requirements
Resident Taxable Person: Both juridical persons (companies) and natural persons (individuals) can qualify, provided they are UAE residents for corporate tax purposes.
Revenue Threshold: The business must have a total revenue of AED 3 million or less in the relevant tax period and all previous periods.
The UAE’s Small Business Relief initiative signifies a strong commitment to supporting the growth and success of small businesses. By understanding the guidelines and eligibility criteria, entrepreneurs and emerging companies can leverage this tax relief to their advantage and thrive in the new corporate tax landscape.
Exceptions: Multinational Enterprise Groups (MNEs): Businesses belonging to MNEs are not eligible for Small Business Relief.
Eligibility conditions for small business relief
Qualifying Free Zone Persons
Businesses already benefiting from a 0% corporate tax rate on qualifying income within free zones are not eligible. The guide states, “Any eligible Taxable Person (being a Resident Taxable Person, either a Juridical Persin or a Natural Person) with Revenue below or equal to AED 3,000,000 in the relevant Tax Period that ends or before 31 December 2026 can elect to be treated as having no Taxable Income in that period. They will not be obliged to calculate their Taxable Income or complete full Tax Returns.”
In order to be able to elect for small business relief, a person must be a Resident Person for Corporate Tax purposes. If they have a revenue less than or equal to AED 3,000,000 in the relevant Tax Period and any previous Tax Periods.
The only exception in this small business relief is that the members of MNEs and Qualifying Free Persons are not eligible for Small Business Relief.
Restriction to Tax Periods ending on or before 31 December 2026
Small business relief will be available for the Tax Period that begins on or after 1 June 2023. This relief will be available for Tax Periods that end before or on 31 December 2026. In this eligibility condition, the Revenue in the relevant tax period and all previous tax periods should be less than or equal to AED 3,000,000.
Example of electing for small business relief
Mr X has a business in Abu Dhabi and operates from there. He is a resident person for corporate tax purposes. He started trading on 1 January 2025, and his Tax Period ends on 31 December. Mr. X derived a revenue of AED 2,000,000 in the most recent Tax Period ending 31 December 2025.
Mr X is eligible to benefit from Small Business Relief because he is a Natural Person with a Business or activity generating Revenue in excess of 1,000,000 and less than AED 3,000,000 for the 31 December 2025 Tax Period.
Mr. X has not breached the Revenue threshold from previous periods, given that the 2025 Tax Period is his first year of operation.
If he wants to benefit from the Small Business Relief, he must make an election in his Tax Return.
Examples of non-resident persons
ABC Ltd is a USA-incorporated company that has an office in Dubai from which it assists its UAE-based clients. ABC Ltd is a Non-Resident Person for Corporate Tax purposes. In its most recent Tax Period ending 31 December 2024, ABC Ltd derived Revenue of AED 2,500,000, with AED 1,000,000 of this Revenue attributable to its office in Dubai.
ABC Ltd is not eligible for Small Business Relief as it is a Non-Resident Person, regardless of its Revenue or having an office in Dubai.
How ebs can help your business?
ebs recognizes the challenges businesses face in navigating the new corporate tax regime in the UAE. Our team has extensive knowledge of small business Relief to guide the businesses about their eligibility. We offer a comprehensive suite of services to help businesses of all sizes comply with, understand, and leverage the benefits of this tax relief program. Our team of dedicated and qualified tax professionals possesses extensive knowledge of the UAE’s corporate tax landscape and specializes in Small Business Relief.
These are some of our expertise in Small Business relief:
- Eligibility assessment
- Record-keeping assistance
- Simplified Tax return filing
- Compliance guidance
- Tax planning strategies
Conclusion
Small business relief is for small business residents for corporate tax purposes in UAE. The purpose of this relief is to ease the corporate tax regime implementation. Small business relief reduces compliance obligations, but the guide should be understood properly. it is often difficult to understand the guide’s technical terms and changing concepts. But you don’t have to worry about it, as the expert team at ebs is your savior.
ebs is one of the best accounting and bookkeeping firms in Dubai, UAE. We have been helping many businesses to stay compliant with the tax system in UAE. We have 200+ active clients with the best user experience.
We provide other services such as accounting and bookkeeping services, Due Diligence audit services, Auditing, and many more. So, you should get a free consultation and contact us today.
FAQs
What is small business relief in UAE?
The United Arab Emirates aims to assist the small business sector. UAE has launched the small business relief scheme. Those businesses having income of up to AED 3 million will benefit from corporate tax relief.
How long can my business benefit from Small Business Relief in the UAE?
Eligible businesses can enjoy the benefits of Small Business Relief until December 31, 2026. This means you can operate tax-free and avoid filing full tax returns until the end of that year. However, be mindful that if your business exceeds the AED 3 million revenue threshold in any year before 2026, you will lose eligibility for the relief and become subject to the standard corporate tax regime.
Does my business automatically qualify for Small Business Relief?
While businesses with annual revenue under AED 3 million are the primary target, automatic qualification isn’t the case. To ensure eligibility, your business must be a resident taxable person (registered as a company or an individual) and not fall under specific exceptions like being part of a multinational enterprise group or already benefiting from a 0% tax rate in a free zone. To confirm your eligibility, it’s advisable to consult with a qualified tax advisor or utilize the FTA’s online eligibility checker.