The UAE has extended corporate tax Small Business Relief to tax periods ending on or before 31 December 2029. The extension is made by Ministerial Decision No. 131, announced by the Ministry of Finance in August 2026. Businesses with revenue up to AED 3 million can keep using the relief and its simpler compliance.
This post explains what that means in practice: who can claim the relief, what it does and does not remove, what happens if you cross the threshold, and how to set up Zoho Books so the revenue figure is ready when you file. It is not tax advice. Check your eligibility with a tax adviser.
What the Extension Says
- Who: resident businesses with revenue of up to AED 3 million in the relevant tax period and in earlier tax periods, subject to the conditions in the law.
- Until when: tax periods ending on or before 31 December 2029.
- What it gives: the business is treated as having no taxable income for the period, with simpler compliance.
According to Willow’s summary of the decision, Ministerial Decision No. 131 of 2026 was issued on 29 July 2026 and amends Ministerial Decision No. 73 of 2023, which introduced the relief. The only change is the end date. The AED 3 million threshold and the other conditions stay as they were.
| Before the extension | After the extension | |
|---|---|---|
| Legal basis | Ministerial Decision No. 73 of 2023 | Ministerial Decision No. 73 of 2023, as amended by Ministerial Decision No. 131 of 2026 |
| Last eligible tax period | Ending on or before 31 December 2026 | Ending on or before 31 December 2029 |
| Revenue threshold | AED 3 million in the tax period and every previous tax period | Unchanged |
| Other conditions | Resident person; election required; exclusions apply | Unchanged |
For a business with a calendar financial year, that means three more years, 2027, 2028 and 2029, in which the relief can be elected, provided revenue stays within the threshold.
Who Can Claim Small Business Relief
The relief is available to a resident person whose revenue does not exceed AED 3 million in the tax period being filed and in every previous tax period. Revenue is measured under the accounting standards accepted in the UAE, which is why the way income is recorded in your books matters.
Two groups cannot elect it, according to the Ministry of Finance guide as summarised by SimplySolved:
- Qualifying Free Zone Persons, who are taxed under the free zone regime instead.
- Members of multinational enterprise groups with consolidated group revenue above AED 3.15 billion.
Individuals running a business are a separate case. The Ministry of Finance has confirmed that natural persons are subject to corporate tax only if their business turnover exceeds AED 1 million in a calendar year, so many sole traders never reach the point of electing the relief at all.
What Electing the Relief Means
Small Business Relief does not simply reduce the tax bill to zero. It switches off parts of the corporate tax regime for the periods in which it is elected:
| Item | Under Small Business Relief |
|---|---|
| Taxable income | The business is treated as having no taxable income for the period, so no corporate tax is payable |
| Tax losses | Losses incurred in relief periods cannot be carried forward. Losses from earlier non-relief periods can only be used in later non-relief periods |
| Net interest expenditure | The same carry-forward restriction applies to disallowed net interest expenditure |
| Transfer pricing documentation | Not required for transactions with related parties and connected persons |
| Records | Books and records must still be kept under the Tax Procedures Law |
The loss rule is the one most often missed. A start-up making losses in its first years may be better off not electing the relief, so the losses can be used later. That is a judgement for your tax adviser, made period by period.
What Relief Does Not Remove
Relief is elected, not automatic. You still need to:
- Stay registered for corporate tax and file the return, electing relief.
- Track revenue closely, because crossing AED 3 million in a period ends eligibility.
- Keep records that support the revenue figure.
- Keep complying with VAT separately, including the 1 October 2026 changes and e-invoicing from 1 July 2027 for businesses under AED 50 million.
The corporate tax return is due within nine months of the end of the tax period. A business that skips the return because its revenue is low risks late-filing penalties, and without the election in the return the relief does not apply.
What Happens When You Cross AED 3 Million
Because the test covers the current tax period and every previous one, crossing the threshold once ends the relief for that period and for every period after it, even if revenue falls back below AED 3 million later. From then on the standard corporate tax rules apply: 0% on taxable income up to AED 375,000 and 9% above that.
In practice the first year above the threshold is when the work arrives: a full taxable income computation, the ability to carry forward losses again, and possibly transfer pricing disclosures. Our guide to Zoho Books features for UAE corporate tax covers what the return then needs from your books.
Zoho Books Setup for Small Businesses on Relief
- Revenue watch. Build a saved report, or a Zoho Analytics widget, showing year-to-date revenue against AED 3 million, with an alert at 80%. Our Zoho Analytics finance reporting guide shows how such dashboards are built.
- Clean revenue accounts. Keep non-operating income, such as asset sales, in separate accounts so the revenue figure is easy to defend.
- Group check. If you run several licences, review whether they should be looked at together. Splitting a business to stay under the threshold is not allowed: where the FTA finds a business was artificially separated to access the relief, it can treat the arrangement under the general anti-abuse rule and adjust the tax advantage. Your adviser confirms how this applies to your licences.
- E-invoicing next. The bigger system change for small businesses is e-invoicing from 1 July 2027. Zoho Software Trading LLC is on the Ministry of Finance list of accredited e-invoicing service providers, so Zoho Books users can prepare inside the same system.
Free Zone Businesses: Relief or the Free Zone Regime
A Qualifying Free Zone Person cannot elect Small Business Relief, and a free zone company that wants to keep qualifying status has to meet the free zone conditions, including the de minimis limits on non-qualifying revenue. Choosing between the two routes is a decision for each tax period with your adviser. Our guide to tracking the qualifying free zone person de minimis test explains the records the free zone route needs.
VAT and E-Invoicing Still Apply
Small Business Relief is a corporate tax measure only. It does not change VAT registration, VAT returns or VAT invoicing. Two VAT changes took effect on 1 October 2026 that affect how input VAT is recovered, covered in our post on UAE VAT changes from October 2026.
E-invoicing comes next. Businesses with revenue below AED 50 million must appoint an accredited service provider by 31 March 2027 and go live on 1 July 2027. Our Zoho Books e-invoicing readiness guide sets out the preparation, from customer master data to tax settings.
Frequently Asked Questions
An election under UAE corporate tax that lets a resident business with revenue of up to AED 3 million be treated as having no taxable income for a tax period. It is claimed in the corporate tax return, not applied automatically.
For tax periods ending on or before 31 December 2029, following Ministerial Decision No. 131 of 2026. Before the extension, the last eligible tax periods ended on or before 31 December 2026.
Yes. A business electing the relief stays registered for corporate tax and files its return within nine months of the end of the tax period, making the election in the return.
The relief ends for that tax period and for every later period, because the threshold applies to the current period and all previous ones. Standard corporate tax then applies: 0% up to AED 375,000 of taxable income and 9% above.
Not if it is a Qualifying Free Zone Person. A free zone company that is not relying on qualifying status can elect the relief if it meets the other conditions. Confirm the better route for your business with your tax adviser.
No. VAT obligations continue as normal, including the October 2026 input VAT changes, and businesses under AED 50 million still go live with e-invoicing on 1 July 2027.
Conclusion
The extension gives small businesses three more years of simpler corporate tax compliance, but the relief still has to be elected each period, the revenue figure still has to stand up, and one year above AED 3 million ends it for good. Set up the revenue watch now, keep income in clean accounts, and plan the e-invoicing change for July 2027 in the same system.
Need a revenue dashboard or e-invoicing setup in Zoho Books? Book a free call with our Zoho Books team, or send us a message. Techvaria is a Zoho Premium Partner with a team in Dubai; see our Zoho Books implementation services.
This article is general information based on the Ministry of Finance announcement and published summaries of Ministerial Decision No. 131 of 2026. It is not tax advice. Confirm your eligibility and filing position with a qualified UAE tax adviser or the Federal Tax Authority.
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