Corporate Tax: FAQs for SMEs in the UAE

Unless the SME has elected to apply for Small Business Relief, the standard Corporate Tax rates apply.  

Yes, SMEs meeting the relevant conditions benefit from the Small Business Relief where, the entity is treated as having no taxable income and is therefore not required to pay Corporate Tax for that period, along with simplified compliance requirements to support smaller businesses. 

Yes, SMEs must register with the Federal Tax Authority (FTA) and file annual Corporate Tax returns. 

Unless opted for the Small Business Relief, SMEs can deduct expenses incurred wholly and exclusively for business purposes, such as employee salaries, rent, utilities, and marketing costs. 

If the entity opts for Small Business Relief, it is treated as having no taxable income, and therefore deductions for business expenses are not applicable during the relief period. 

Startups classified as SMEs are subject to Corporate Tax in the UAE under the same framework as other taxable persons. However, to support early-stage businesses, the Corporate Tax Law provides relief through: 

• A 0% tax rate on taxable income up to AED 375,000 

• The option to apply for Small Business Relief if their annual revenue does not exceed AED 3 million (available until the end of the 2026 tax period) 

If a startup qualifies for and elects Small Business Relief, it is treated as having no taxable income for the relevant period and is exempt from Corporate Tax, reducing the compliance and financial burden during the growth phase. 

While not all SMEs are required to prepare audited financial statements, maintaining accurate financial records is mandatory. Audit requirements depend on the business size and nature. 

Unless opted for Small Business relief, SMEs can carry forward business losses to offset against future taxable income, subject to specific conditions outlined in the Corporate Tax law. 

Yes, family-owned SMEs are subject to the same Corporate Tax rules. However, proper structuring may provide tax efficiencies. 

SMEs operating in Free Zones may qualify for the 0% Corporate Tax rate on qualifying income, provided they meet specific criteria and conditions set by the Free Zone authorities. 

Income from cross-border transactions is subject to UAE Corporate Tax if it is sourced within the UAE or attributable to UAE operations. 

SMEs must maintain accurate records of income, expenses, contracts, and financial transactions to comply with Corporate Tax regulations. 

Penalties may include fines for late registration, failure to file tax returns, underreporting income, or failure to pay taxes due. 

14. Are there special provisions for SMEs under Corporate Tax?

The UAE’s Corporate Tax framework includes simplified compliance and filing requirements to ease the tax burden on SMEs. 

• Register with the FTA. 

• Maintain detailed and accurate financial records. 

• Seek guidance from tax professionals to optimize compliance and tax planning.