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Small Business Relief (SBR) is a provision that eases the implementation of Corporate Tax for small businesses in the UAE by reducing their compliance obligations. It relieves them of the burden of calculating and paying Corporate Tax.
Any Resident Taxable person with revenue below or equal to AED 3,000,000 in a relevant tax period and all prior periods before 31st December 2026, can opt to have no taxable income for that period, and will not be obliged to calculate its Taxable Income or complete a full Tax Return.
SBR provides eligible taxable persons with Administrative and Tax relief. They are exempted from calculating their taxable income and can benefit from simplified tax return filing, record-keeping requirements, and cash basis accounting for financial statements. Additionally, they will not be required to pay any corporate tax on their income for the tax period. To benefit from SBR, eligible taxable persons can opt for it in their tax return.
To qualify for SBR, a taxable person’s revenue must not exceed AED 3,000,000 for the relevant and previous tax periods. If the revenue exceeds the limit, the taxable person cannot avail SBR even if it falls below the limit in subsequent tax periods.
Revenue, as defined by the Law, is the total income a business generates, including all sales and other gross income.
Revenue should be determined using the arm’s length principle and should consider all income from a juridical person’s Business Activities and certain defined Business Activities of a natural person.
SBR cannot be availed by those individuals who deliberately divide their business into multiple entities to ensure that the revenue of each entity remains below the threshold for SBR. If the Federal Tax Authority (FTA) determines that such artificial separation has occurred, the individual will be required to repay any unpaid Corporate Tax along with any applicable penalties.
If a Resident Person eligible for Small Business Relief elects for it in a Tax Period, they will not be able to utilize the provisions of the Corporate Tax Law related to Tax Losses in that period. This means that they cannot accrue, use, or transfer any Tax Losses.
However, if the Resident Person has unutilized Tax Losses brought forward from previous Tax Periods at the beginning of the Tax Period in which they elect for Small Business Relief, such Tax Losses will continue to be carried forward and can be used in the next Tax Period in which the Resident Person has Taxable Income and has not elected for Small Business Relief, provided they meet the conditions of carrying forward and utilizing available Tax Losses.
If a Resident Person who is eligible for SBR chooses to elect it for a Tax Period, they will not be subject to the General Interest Deduction Limitation Rule during that period. This implies that they will not be able to accumulate or use any Net Interest Expenditure in that Tax Period, nor carry it forward to any subsequent Tax Periods.
However, if the Resident Person has any Net Interest Expenditure incurred in previous Tax Periods where Small Business Relief was not elected, at the start of the Tax Period in which they select Small Business Relief, such Net Interest Expenditure will be carried forward and can be used in the next Tax Period in which they have Taxable Income and have not elected for SBR.
There are certain types of income that do not fall under the taxable category. These types of income are called Exempt Income, and businesses are required to exclude them while calculating their taxable income. However, if a business has opted for SBR, the rules on Exempt Income would not apply to them. This means that even if the income earned is not taxable, it must be included while calculating the revenue for SBR Purposes.
Businesses can benefit from tax relief when transferring assets or liabilities within a Qualifying Group or undergoing certain restructuring transactions. If the conditions are met, both parties can record the transaction as occurring at net book value, with no gain or loss to either party for Corporate Tax purposes.
However, these reliefs are unavailable to businesses that elect for SBR. Small Business Relief treats businesses as if they had no taxable income, meaning that the transaction amount has no impact on their tax position.
SBR is based on Revenue alone, and deductions do not apply to Businesses that have elected for it. Thus, any expenditure will not impact a Business that has opted for Small Business Relief.
Transfer pricing is a method to determine prices for taxable persons during related-party transactions, preventing tax base erosion and profit shifting.
Businesses must submit transfer pricing disclosures to the FTA, either with their tax returns or within 30 days of an FTA request.
Small businesses can opt for relief during a tax period, exempt from transfer pricing documentation requirements. However, they must comply with the Arm’s Length Principle, and the FTA can still review their tax affairs and relatedparty transactions.
Companies under common ownership can form a Tax Group if they qualify for Small Business Relief. This reduces compliance burdens by consolidating accounts and eliminates intra-group transactions.
A revenue threshold of AED 3,000,000 applies to the Tax Group as a whole, not each member.
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