Small Business Relief: Qualification Requirements Before Phase-Out

Executive Summary

Small Business Relief allows eligible UAE resident persons with revenue not exceeding AED 3 million per Tax Period to elect for nil Taxable Income treatment, effectively eliminating Corporate Tax liability. This relief is available for Tax Periods commencing on or after 1 June 2023 but will cease to apply for Tax Periods ending after 31 December 2026, requiring businesses to plan their transition to standard Corporate Tax compliance.

Legal Basis

• Federal Decree-Law No. 47 of 2022, Article 21 (Small Business Relief framework)
• Ministerial Decision No. 73 of 2023 (implementing conditions and thresholds)
• Cabinet Decision No. 44 of 2020 (Multinational Enterprises Group definition)

Analysis

Small Business Relief operates as an elective simplification measure under Article 21 of the Corporate Tax Law, allowing qualifying Taxable Persons to be treated as having no Taxable Income for a given Tax Period. The election must be made on a period-by-period basis through the Tax Return filing process.

The relief targets genuine small businesses by imposing both quantitative and qualitative restrictions:

• Revenue must not exceed AED 3 million in the current or any previous Tax Period


• Certain entity types are categorically excluded regardless of revenue

> ⚠️ Important: Once revenue exceeds AED 3 million in any Tax Period, the Taxable Person permanently loses eligibility for Small Business Relief in all subsequent periods [Ministerial Decision No. 73 of 2023, Article 2(3)].

Key Requirements

Revenue Threshold:

• Maximum AED 3,000,000 per Tax Period [Ministerial Decision No. 73/2023, Article 2(1)]


• Revenue determined per applicable accounting standards accepted in the State [Article 2(4)]


• Threshold applies to current and all previous Tax Periods

Excluded Persons (cannot elect regardless of revenue):

• Constituent Companies of Multinational Enterprises Groups [Article 3(a)]


• Qualifying Free Zone Persons [Article 3(b)]

Temporal Scope:

• Available for Tax Periods commencing on or after 1 June 2023


• Ends for Tax Periods ending after 31 December 2026 [Article 2(2)]

Dependencies

The relief interacts with other Corporate Tax provisions that require careful consideration:

• Tax Losses: Losses incurred during Small Business Relief periods cannot be carried forward; however, pre-existing unutilised losses remain available for future non-relief periods [Article 4]
• Interest Deduction: Net Interest Expenditure incurred during relief periods cannot be carried forward under Article 30 rules [Article 5]

Critical Considerations

Anti-Avoidance Provisions:

• Artificial separation of a single Business across multiple Persons to remain below the threshold constitutes a tax avoidance arrangement under Article 50 of the Corporate Tax Law [Ministerial Decision No. 73/2023, Article 6(1)]


• The FTA will examine financial, economic, and organisational links between entities [Article 6(2)]

Planning Timeline:

• Final eligible Tax Period must end on or before 31 December 2026


• Businesses should prepare for standard Corporate Tax compliance, including proper record-keeping and potential audited financial statement requirements

> 💡 Note: Election is made through the Corporate Tax Return—no separate application is required, but the Taxable Person must still register for Corporate Tax and file returns.