Corporate Tax in the UAE has had its fair share of challenges for businesses, especially small companies, startups, and freelancers. But here is the good news for all whose annual revenue doesn't go beyond AED 3 million: The UAE government has a Small Business Relief that can exempt eligible businesses from paying corporate tax. Further below is how this will work to the benefit of small businesses, and how they must go about claiming the relief.
What is Small Business Relief?
Small Business Relief (SBR) is a relief under the UAE Corporate Tax regime; this relief enables qualified businesses to be exempted from paying corporate tax if annual revenue stands below AED 3 million. In fact, it can be availed until the end of 2026 and exclusively for tax periods ending on or before December 31, 2026.
SBR is designed to support small businesses by reducing the tax burden and enabling reinvestment of profits into growth and development. However, businesses must apply for this relief each year when filing their corporate tax.
Who Is Eligible for Small Business Relief?
The conditions that must be fulfilled to qualify for Small Business Relief are:
Revenue Threshold: Your business revenue should not exceed AED 3 million as of the current tax period and all preceding tax periods from June 1, 2023, onward. In this context, all types of revenues are included, such as revenues from the sale of products and services, freelance work, affiliate revenue, etc.
Business Type: The business should be a resident person in the UAE, implying that it should be registered in the UAE and therefore subject to local laws. This includes individuals, proprietorships, and LLCs.
Exclusion for Certain Entities: Businesses that fall within the category of Qualifying Free Zone Persons or those who belong to a multinational group whose revenues exceed AED 3.15 billion globally do not qualify for SBR.
Note, however, that it’s not automatic and that the business owners have to make application for it, which includes electing it when filing their corporate tax return.
Understanding the AED 3 Million Revenue Limit
The AED 3 million revenue threshold would not refer to profit, but to gross revenue, including all income earned from business activities such as:
- Sales of products or services
- Consulting or Freelance Fees
- Affiliate marketing or other commissions
- Any other type of income generated from business ventures, including subscriptions and the sale of assets
It is vital to compute your revenue in conformity with UAE accounting standards. Depending on your business, you may need to compute your revenue on a cash basis or accrual basis.
If you have a revenue higher than AED 3 million, even by a small amount, you will not be eligible for Small Business Relief that year or any subsequent year.
Can Freelancers and Individuals Apply?
The AYes, freelancers, and individuals who practice business in the UAE are also entitled to Small Business Relief. If you are a freelancer, a sole proprietor, a content creator, a digital consultant, and earn revenues less than AED 3 million, you can apply.
However, you will need to:
- Register for corporate tax
- Proper maintenance of accounts
- File your tax return correctly
Finanshels may be helpful in the management of these processes to ensure the business is complying with the regulations and availing the tax relief provided.
Who Is Not Eligible for Small Business Relief?
Some businesses are exempted from the benefits of SBR:
- Qualifying Free Zone Persons (QFZPs): These types of businesses are already enjoying a special tax exemption under the Free Zone status, hence are not eligible for SBR.
- Multinational Enterprise Groups: Any UAE company that forms part of multinational groups whose revenue goes beyond AED 3.15 billion is not eligible for SBR.
- Artificial Business Splitters: The UAE government is closely monitoring businesses that try to split their operations under multiple licenses to avoid the limit of UAE revenue. Doing so will amount to a penalty.
Documents and Records Required for Small Business Relief
However, even though your business qualifies for the Small Business Relief, you must have proper documents. Here are some documents you will need:
- Trade License or Business Permit: Valid license from the UAE Government.
- Tax Registration Number (TRN): This field is used for your corporate tax registration.
- Financial Statements:These should be maintained on a cash basis if revenue is less than AED 3 million.
- Income Records: Correctly classify income records to indicate where you earn revenue.
- Invoices, Bank Statements, and Receipts: To substantiate the accuracy of your income calculations.
- EmaraTax Registration: The business must be registered in the EmaraTax system, and you must register to avail the relief.
How to Apply for Small Business Relief Using EmaraTax
The following steps must be taken to claim Small Business Relief:
- Register for Corporate Tax on EmaraTax: First of all, register your business on EmaraTax’s portal by filling in your business details and attaching any mandatory documents as requested by EmaraTax.
- Obtain Your TRN: Once you successfully register, you will be provided with a Tax Registration Number (TRN) by the Federal Tax Authority (FTA).
- Elect Small Business Relief: On your corporate tax return, you should elect the Small Business Relief by filling in the appropriate box on the form (usually Box 26). This is an annual requirement.
- Retain Proof of Eligibility: You have to keep a record of your revenue, tax files, and also the proof of your eligibility.
Common Mistakes to Avoid
Though it is easy to apply and obtain Small Business Relief, many small businesses are disqualified because of mistakes made by the owners, which are:
- Forgetting to Elect SBR: If you failed to elect Small Business Relief in filing your tax return, it is one of the errors to correct. Ensure that you properly select a box on your return.
- Miscalculating Revenue: Make a proper calculation of your revenue and do not mix your personal and business revenues.
- Delaying Registration: Failure to meet the time frame for registering corporate tax may attract penalties.
Finanshels will ensure that all documents are filed correctly, and your business continues to comply with FTA rules.
What Happens If I Exceed AED 3 Million in Revenue?
In case your business enterprise crosses the limit of AED 3 million in revenues, you will be disqualified from obtaining tax relief under Small Business Relief. The moment this happens, you will need to file as a regular taxpayer and pay a tax rate of 9% on income that is more than AED 375,000.
Finanshels enables you to monitor your revenue in real-time, ensuring that you are always within the limit and do not slip beyond the threshold unexpectedly.
Penalties for Non-Compliance
The UAE government has severe punishments in place for those businesses that attempt to manipulate the system. These punishments include:
- Fines: In case of Incorrect/ Late Filings
- Back-Tax Demands: In case of an error, there may be a requirement to pay back taxes
- License Restrictions: Severe cases might impact the business license
Finanshels guarantees that your information is accurate, lowering the probability of fines and audits.
How Finanshels Can Help
Finanshels provides end-to-end solutions that make claiming small business relief as hassle-free as possible. So, here's what we can help with:
- Corporate Tax Registration: We assist with all the registration processes on EmaraTax to ensure everything is in order.
- Accounting Support: We assist in keeping accurate accounting records based on the nature of your business.
- Tax Filing: We guarantee that your corporate taxes are filed timely and that you make an election for Small Business Relief.
- Compliance Monitoring: We provide real-time revenue tracking so that you remain below the AED 3 million threshold.
Conclusion
The tax exemption for small businesses, named Small Business Relief, is an important exemption for small businesses in the UAE. Knowing how to qualify for this tax exemption, keeping accurate records, and filling in your tax returns correctly can help you enjoy this exemption as well as save you from extra tax liabilities.
We here at Finanshels help small business owners deal with the intricate nature of corporate tax. Why not let us take care of your tax submissions and ensure you focus on running your business? Get your free eligibility check done today!
Top 5 FAQs about Small Business Relief
1. Is SBR only for LLCs?
No, individuals and freelancers can apply too.
2. Can I switch back to SBR if my revenue falls?
No. Once ineligible, always ineligible.
3. How do I track revenue mid-year?
Use digital dashboards or accounting software. Finanshels offers both.
4. Will the government extend this beyond 2026?
There’s no official word yet, plan as if it ends December 31, 2026.
5. Can I get expert help without hiring a full-time accountant?
Yes! Finanshels provides on-demand compliance services tailored to startups and SMEs.
