Small Business Relief is ending. The relief is available only for tax periods ending on or before 31 December 2026, no extension has been announced, and from 2027 every small business that relied on it moves onto the standard corporate tax regime. For a calendar-year business, the financial year ending 31 December 2026 is the last period for which an election can be made — which makes this the year to use the relief deliberately and to plan for what follows.
What the Relief Actually Does
Small Business Relief lets an eligible resident business elect, in its corporate tax return, to be treated as having no taxable income for the period. The result is no corporate tax to pay and a simplified computation — no need to work through taxable income line by line. It is an election, not an exemption: the business remains a taxable person, registered with the Federal Tax Authority, and the relief exists only for the periods in which it is actually claimed.
Who Can Elect
Three tests sit at the core. The business must be a resident taxable person; its revenue must not exceed AED 3 million for the tax period in question and for every earlier tax period; and the election must be made in the return for each period it is used. Cross the AED 3 million line once and the relief is gone for good — eligibility does not reset in a later, quieter year.
Who Cannot
Two exclusions matter in practice. Qualifying free zone persons cannot claim the relief — the free zone regime and Small Business Relief do not stack. Members of multinational enterprise groups are also excluded, however small the UAE entity itself may be. And because the relief is elective, a business that simply never makes the election in its return has not claimed it, whatever its revenue.
What the Relief Does Not Switch Off
Registration, the annual return and record-keeping all continue — supporting records must be kept for seven years, and revenue must be demonstrable, since the threshold is tested on evidence rather than assertion. Anti-abuse rules also apply: artificially separating one business into several entities to stay under AED 3 million can be unwound by the FTA, with penalties. One further consequence is easy to miss: tax losses and surplus interest capacity arising in a period covered by the relief cannot be carried forward. An electing business gives up those attributes for that period.
Planning for 2027
From the first tax period beginning after the sunset, small businesses compute taxable income in full and pay 9% on anything above AED 375,000. Three preparations pay off. First, confirm the accounting basis can produce a defensible taxable-income computation — informal records that were tolerable under the relief will not carry a standard return. Second, model the cash tax early: a business with AED 600,000 of taxable income faces a charge of roughly AED 20,000, which is a budgeting question rather than an existential one, but only if it is budgeted. Third, decide whether electing in the final eligible period is actually advantageous — a loss-making business may be better off filing normally, since losses incurred under the relief cannot be carried into the 9% era while losses computed under the standard rules can.
Reading the Sunset Correctly
The relief was always designed as a transition measure for the regime’s opening years rather than a permanent feature. Its expiry does not change rates or thresholds for anyone else, and it does not affect VAT, which has its own registration tests. What it changes is posture: compliance habits the relief made optional — clean monthly closes, documented revenue, a real tax computation — become unavoidable from 2027. The groundwork is bookkeeping discipline of the kind described on our accounting and outsourced services page, inside the annual compliance cycle outlined under UAE taxation.
Frequently Asked Questions
When does Small Business Relief end?
Small Business Relief is available only for tax periods ending on or before 31 December 2026, and no extension has been announced. For calendar-year businesses, the year ending 31 December 2026 is the final period for which an election can be made.
Who qualifies for Small Business Relief?
Resident taxable persons whose revenue is AED 3 million or less in the relevant tax period and in all previous tax periods, provided they elect in their corporate tax return. Qualifying free zone persons and members of multinational enterprise groups are excluded.
Does electing remove the need to register and file?
No. Registration with the FTA, an annual return containing the election and seven-year record-keeping all remain mandatory. The relief removes the tax computation and the liability, not the compliance cycle.
What happens after the relief expires?
From the next tax period the standard regime applies: taxable income computed in full, taxed at 0% up to AED 375,000 and 9% above it. Businesses should test their accounting basis now rather than in the first post-relief filing season.
Should a loss-making business elect the relief?
Often not. Losses arising in a period covered by the relief cannot be carried forward, whereas losses computed under the standard rules can be. A business expecting losses now and profits later should weigh the election carefully before ticking the box.