On 7 August 2026 the UAE Ministry of Finance announced Ministerial Decision No. 131, extending Small Business Relief to tax periods ending on or before 31 December 2029. The relief had been due to run out with periods ending on 31 December 2026, and that expiry date sat inside every honest projection built for a small UAE company since corporate tax began. Three additional years is a real change to those projections. It is also, read closely, a narrower change than the headlines suggest. The threshold has not moved, the exclusions have not moved, and the price of electing the relief is exactly what it was.
What Ministerial Decision No. 131 actually changes
Small Business Relief sits in Article 21 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. The mechanics were set out in Ministerial Decision No. 73 of 2023, which fixed the revenue threshold at AED 3,000,000 and, critically, capped the availability of the relief at tax periods ending on or before 31 December 2026. Ministerial Decision No. 131 amends that position and nothing else of substance. The Ministry of Finance announcement confirms that the threshold prescribed under the 2023 decision continues to apply to tax periods commencing on or after 1 June 2023, and now applies to subsequent tax periods ending on or before 31 December 2029.
It helps to be precise about what the relief does, because the language around it is frequently loose. It is not a reduced rate and it is not an exemption from the corporate tax regime. An eligible resident taxable person that elects for the relief is treated as having derived no taxable income for that tax period. The consequence is that no corporate tax is payable, regardless of the actual profit, and the compliance load for that period is lighter. The Ministry frames the extension as support for small businesses and start-ups and as part of keeping the UAE tax system competitive while staying aligned with international practice.
For a business already operating in the UAE below the threshold, the practical effect is straightforward. A relief that was going to disappear after the 2026 period now runs for three further years, which changes cash flow modelling for early-stage companies more than it changes anything structural. For a business considering the UAE for the first time, the honest reading is different, and we return to it at the end.
The threshold is revenue, and it works as a cliff
The AED 3,000,000 figure is a revenue threshold, not a profit threshold. Revenue is determined under the accounting standards accepted in the UAE, which for most companies means IFRS or IFRS for SMEs. A company with AED 2,800,000 of revenue and a thin margin qualifies. A company with AED 3,200,000 of revenue and a loss does not. This trips people up constantly, because the other well-known number in the regime, AED 375,000, is a taxable income threshold and behaves entirely differently.
The two should never be confused. The AED 375,000 threshold is permanent, applies to every taxable person, and produces 0% below it and 9% above it. Small Business Relief is temporary, is capped by revenue rather than profit, and switches taxable income to nil altogether for the period in which it is elected. A company with AED 2,500,000 of revenue and AED 900,000 of profit would otherwise pay 9% on the amount above AED 375,000. With the relief elected, it pays nothing.
That last point deserves emphasis because it is a design feature rather than an oversight. Eligibility requires revenue at or below the threshold in the relevant tax period and in every previous tax period. Once a business exceeds AED 3,000,000 in any period, the relief is permanently unavailable, even if the following year is weaker. A company approaching the line late in a financial year is therefore making a decision about several future years, not one.
The obvious workaround is closed off. Ministerial Decision No. 73 of 2023 states that where the Federal Tax Authority establishes that a taxable person has artificially separated a business or business activity, and the combined revenue exceeds AED 3,000,000, the arrangement falls under the general anti-abuse rule in Article 50 of the Corporate Tax Law. Splitting one operating business across two or three licences to sit under the threshold is not tax planning. It is the specific behaviour the rule was drafted to catch.
Who cannot elect the relief
The relief is available only to resident taxable persons, which covers UAE-incorporated companies and natural persons carrying on a business in the UAE. Non-residents and permanent establishments of foreign companies are outside it. Two further exclusions carried over unchanged from the 2023 decision, and both matter more than the threshold for the businesses we typically advise.
| Position | Corporate tax above AED 375,000 | Small Business Relief available |
|---|---|---|
| Mainland company, standard regime | 9% | Yes, if resident and within the revenue threshold |
| Free Zone company that is not a QFZP | 9% | Yes, on the same conditions |
| Qualifying Free Zone Person | 0% on Qualifying Income, 9% on the rest | No |
| Member of an MNE Group above AED 3.15 billion | 9% | No |
The exclusion of the Qualifying Free Zone Person is the line that does the work. The two regimes are mutually exclusive, so a company cannot hold QFZP status and elect Small Business Relief for the same period. In practice this rarely creates a dilemma, because a business genuinely capable of sustaining QFZP status is usually operating well above AED 3,000,000 of revenue and would gain nothing from a relief it is too large to claim.
Where it does create a decision is at the smaller end. A Free Zone company with revenue under the threshold has to look honestly at whether its activity appears on the list of Qualifying Activities at all. If it does not, and marketing, coaching, recruitment, retail, and consulting supplied to unrelated third parties do not, then QFZP was never available and the relief is the more useful of the two. If the activity does qualify, the arithmetic is a genuine comparison, and it is worth understanding the six conditions a QFZP has to meet before assuming the status is within reach. The wider question of what a Free Zone licence does and does not deliver is covered in our guide to the Dubai Free Zone company.
The second exclusion is narrower. Members of a Multinational Enterprise Group with consolidated group revenue above AED 3.15 billion, as defined in Cabinet Decision No. 44 of 2020, cannot elect the relief regardless of how small the UAE entity is. A modest UAE subsidiary of a large international group is therefore outside the regime by virtue of its parent, not its own size.
Find out which regime your UAE company actually sits in
Small Business Relief, the standard 9% regime, and QFZP status lead to very different outcomes, and the choice is usually decided by facts a licence agent never asks about. A paid initial consultation tests your activity, your revenue trajectory, and your group position against all three. The fee is credited against future INCORPORTAS services.
Book an assessmentWhat electing the relief costs you
The election is not automatic and it is not free of consequence. Two of them are worth modelling before the return is filed rather than after. A taxable person that elects the relief for a tax period cannot carry forward tax losses incurred in that period, and cannot carry forward net interest expenditure that was disallowed in that period. Both are permanently lost, not deferred.
For a profitable small company this is academic. For a start-up in its first trading years it is not. A business that expects to lose money for two periods and then turn a solid profit in the third has a real choice to make. Electing the relief in the loss-making periods saves nothing, because there was no tax to pay, and it destroys the losses that would otherwise have sheltered the profitable year. Declining the relief in those periods preserves them. The extension to 2029 widens the window over which this arithmetic runs, which makes the modelling more valuable rather than less.
The same logic applies to leveraged structures. A company carrying shareholder or bank debt at a level that produces disallowed net interest expenditure is giving up a future deduction each time it elects. Whether that matters depends on how confidently the business expects to grow into the deduction, which is a forecasting question rather than a tax question, and one the accountant and the owner should answer together.
The election is made period by period. A company can decline the relief in one year and elect it in the next, provided the revenue history still supports eligibility. That flexibility is the reason the decision belongs in the year-end close rather than in a standing instruction given once and forgotten.
The relief is not a filing holiday
On 3 August 2026, days before the extension was announced, the Federal Tax Authority issued a reminder on exactly this point. Taxable persons eligible for Small Business Relief must continue to meet every obligation under the Corporate Tax Law for each tax period. That means registering for corporate tax, submitting a return, and maintaining the records that support what the return says.
The election itself is made through the corporate tax return. There is no separate application and no advance ruling. A business that qualifies but does not file simply does not have the relief, and a late return attracts penalties whether or not tax was due. What the relief does deliver on the compliance side is a simplified return, which reduces the volume of information required rather than removing the filing obligation.
Records are the other half of it. The Authority expects a taxable person claiming the relief to be able to evidence that revenue did not exceed the threshold, which in practice means maintained books, supporting documentation for transactions, and a record of assets, liabilities, and ownership interests at the end of the period. A company that elects the relief and then keeps no accounts has claimed something it cannot defend on review.
Deadlines follow the ordinary rule of nine months from the end of the tax period. For a company with a financial year ended 31 December 2025, the return and any payment are due by 30 September 2026. Value added tax is a separate regime with its own registration threshold and its own filing cycle, and Small Business Relief does not touch it.
What this means if you are structuring now
The extension is welcome and it is worth planning around. It is not a reason to incorporate in the UAE. Small Business Relief is a compliance easement for genuinely small businesses, it applies to revenue that would in most cases fall below the level at which an international structure pays for itself, and it now carries a fixed end date three years further out than it did last week. Anyone presenting it as a headline argument for moving a business to Dubai is arguing from the wrong number.
The questions that actually decide whether a UAE structure works are unchanged. Whether the activity generating the income is a Qualifying Activity. Whether the substance in the UAE is real enough to survive scrutiny, which is a matter of premises, people, and where decisions are genuinely taken. What your home jurisdiction does with the profits once they leave the UAE, since controlled foreign company rules and place of effective management tests sit outside the UAE regime entirely and are not affected by any ministerial decision issued in Abu Dhabi. Our guide to UAE international tax planning sets out how those pieces fit together.
There is also a floor to the cost of running a UAE company properly, and it does not fall away because tax does. Licence renewal, premises, accounting, corporate tax and VAT compliance, and a statutory audit where one is required, which for a small to mid-sized entity typically runs from USD 1,500 to USD 2,500 a year. Below a certain level of cross-border profit the structure costs more than it returns, and we would rather say so at the outset.
Where the extension genuinely helps is the case it was written for. A young UAE business with real operations, revenue under AED 3,000,000, and a growth curve that will eventually take it past the line now has three more years of headroom to build before the standard regime applies. That is worth modelling into a plan. It is not worth building a plan around.
Common questions
Has the extension changed the AED 3,000,000 threshold?
No. Ministerial Decision No. 131 moves the end date only. The revenue threshold set by Ministerial Decision No. 73 of 2023 continues to apply to tax periods commencing on or after 1 June 2023 and to subsequent periods ending on or before 31 December 2029.
Can a Free Zone company claim Small Business Relief?
Yes, provided it is not a Qualifying Free Zone Person for that period and meets the other conditions. The two regimes cannot be combined. A Free Zone company whose activity is not on the list of Qualifying Activities was never going to reach QFZP status in any case, and for that company the relief is the more relevant of the two.
Do I still have to file a return if I elect the relief?
Yes. Registration, filing, and record keeping all continue. The election is made through the return itself, and the return is simplified rather than waived. The deadline remains nine months from the end of the tax period.
What happens in the period my revenue exceeds AED 3,000,000?
The standard regime applies from that period onward, meaning 0% on the first AED 375,000 of taxable income and 9% above it. The relief does not become available again in a later period where revenue falls back below the threshold.
Model the relief against your actual numbers before you elect
Whether to elect Small Business Relief depends on your revenue trajectory, your losses, your interest cost, and where your structure is heading after 2029. A paid initial consultation with our tax team runs those variables against your own figures and gives you a position you can act on. The fee is credited against future INCORPORTAS services.
Book a consultationThis article is a general guide to Small Business Relief under the UAE Corporate Tax Law as at August 2026 and is not individual tax advice. How Ministerial Decision No. 131, Ministerial Decision No. 73 of 2023, and the rules of your home country apply to a specific business depends on its facts and should be reviewed with a licensed tax adviser in the UAE and in your home jurisdiction.
