Small Business Relief in the UAE — AED 3M Threshold, Election Mechanics

What SBR is

Small Business Relief (SBR) under Ministerial Decision No. 73 of 2023 allows an eligible Resident Person to treat its taxable income as zero for a tax period — there is no Corporate Tax payable for that period. Registration with the FTA and a CT return are still required; the return discloses the SBR election and reports the zero liability.

The mechanism is intentionally simple: the relief reduces the compliance burden for genuinely small businesses while keeping them inside the registration and reporting framework. It is not a permanent exemption — it is a per-period election available while the entity stays below the threshold and while the regime remains in force.

Who can elect

To elect SBR for a tax period, the Taxable Person must be:

• A Resident Person (Resident Juridical Person or qualifying Resident Natural Person)
• NOT a member of an MNE Group (consolidated revenue ≥ EUR 750M)
• NOT a Qualifying Free Zone Person
• With Revenue not exceeding AED 3 million in the relevant tax period AND in all previous tax periods
• For tax periods ending on or before 31 December 2026 (the sunset)

The "all previous tax periods" test is the trap most often missed. Once you exceed AED 3M in any prior period, you cannot elect SBR in subsequent periods even if revenue drops back below the threshold.

How the election works

The election is made on the CT return for the period — not separately. For each eligible tax period, the Taxable Person decides whether to elect SBR or to file as a standard Taxable Person. The implications:

• No tax payable for the period — the entire taxable income figure becomes zero for the SBR-elected period
• Losses NOT carried forward — losses in an SBR-elected period are forfeited; SBR effectively waives them
• No interest deduction limitation calculation needed — moot for the period
• No QFZP, no group relief — these are not available alongside SBR
• Re-elect each year — the election is per-period; you decide annually based on the position

For most eligible entities the election is the right choice; for an entity with material loss positions or planning a near-term threshold breach, the standard regime may produce a better long-run outcome.

The 31 December 2026 sunset

As enacted, SBR is available only for tax periods ending on or before 31 December 2026. After that, the regime expires unless extended by further Ministerial Decision. The sunset is a known feature, not an oversight — the FTA designed it as a transitional support measure for early CT-implementation years.

Watch the FTA portal for any extension announcement. Do not assume continuity beyond the sunset — model your post-2026 position as if SBR no longer applies, then adjust if the regime is extended.

Interaction with QFZP and CT registration

SBR and QFZP are mutually exclusive. A Free Zone entity must choose its strategy: maintain QFZP for 0% on Qualifying Income (with all five conditions and audited statements), elect SBR if revenue is below AED 3M and the QFZP overhead is not justified, or simply pay 9% above AED 375K under the standard regime. The right answer depends on revenue trajectory, the cost of audit and substance, and the composition of Qualifying vs Non-Qualifying Income.

SBR does NOT exempt from CT registration. Every eligible entity still registers with the FTA and files a return — the election is reported on the return. Skipping registration "because we elected SBR" is a separate non-compliance event with its own penalty.

When to engage Consorata

For first-time CT periods where SBR may apply: at the start of the period so we monitor revenue against the threshold monthly and document the election rationale. For entities approaching the AED 3M threshold: at the half-year, so we can advise on whether to defer or accelerate revenue recognition where commercially flexible. For groups: whenever a member's eligibility changes, since the choice may shift group-relief planning.