Small Business Relief: Why 2026 Is the Last Year to Elect It

What Small Business Relief actually does

Small Business Relief lets an eligible resident taxable person elect to be treated as having no taxable income for a tax period, rather than calculating tax normally. Instead of working through revenue, deductions, exempt income and adjustments, the business simply declares nil taxable income on its Corporate Tax return for that period. It is an election made on the return itself — it is not automatic, and it does not exempt a business from registering or filing.

Who is eligible

• Revenue of AED 3 million or less in the relevant tax period and in every previous tax period back to 1 June 2023. One year over the threshold permanently disqualifies the business from ever electing again, even if revenue later drops.
• The business must be a resident person for Corporate Tax purposes — free zone or mainland, but not a Qualifying Free Zone Person claiming the 0% regime for that period.
• Not a member of a Multinational Enterprise Group (a group with consolidated group revenue of AED 3.15 billion or more) or a Qualifying Group Company for these purposes.

Revenue is measured under the applicable accounting standards for the whole business, not just UAE-source revenue, and the FTA has been clear that artificially splitting a business into smaller entities to stay under the threshold can be challenged as an arrangement to obtain a Corporate Tax advantage.

The real trade-off: what you give up

Electing Small Business Relief is attractive because it removes the compliance burden of a full tax computation, but it is not free of cost. In a period where relief is elected:

• Tax losses cannot be carried forward. If the business made a loss in a relief year, that loss is simply gone — it cannot offset a profitable year later.
• Excess interest cannot be carried forward under the general interest deduction limitation rules.
• Unutilised Qualifying Group Relief or Business Restructuring Relief carry-forward amounts are also affected for that period.
• The election is made period by period, but a loss of eligibility in any period is permanent for future periods, even after revenue falls back below AED 3 million.

For a genuinely small, steady business with no losses to protect and no group restructuring in the pipeline, the relief is close to a free simplification. For a business that expects a loss-making year, is investing heavily, or is approaching the AED 3 million line and might cross it soon, running the numbers both ways before electing is worth the hour it takes.

What happens after 2026

As currently legislated, Small Business Relief is not available for tax periods ending after 31 December 2026. Unless the Ministry of Finance extends it — which it has not yet announced — a small business filing for FY2027 onward will need to prepare a full Corporate Tax computation even if revenue stays under AED 3 million, applying the standard 0% band up to AED 375,000 of taxable income and 9% above it. Practically, this means:

1. Bookkeeping quality needs to be ready for a real tax computation before the relief window closes, not after.
2. Businesses that have relied on relief to avoid maintaining proper IFRS-based accounts should use the remaining periods to build that discipline.
3. Anyone weighing whether to elect relief for FY2026 should also model what the FY2027 return will look like without it, so the transition is not a surprise.

What to do now

If your revenue is at or near AED 3 million, get the figure confirmed precisely before filing — crossing the line even slightly removes eligibility permanently. If you are comfortably under the threshold and have no losses or group relief to protect, electing relief for FY2025 and FY2026 is usually straightforward. Either way, use 2026 to get your bookkeeping to a standard that supports a full computation, because that requirement will not go away.

Frequently asked questions

This guide is general information based on UAE law and FTA guidance as at the update date, not professional advice. Rules change; confirm your position with a Chartered Accountant before acting.