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Small business relief lets a resident taxable person elect to be treated as having no taxable income for a tax period, if its revenue is within a limit set by the Minister. The limit is AED 3,000,000 or less in the current period and in all previous tax periods. You make the election for each period. Source: Federal Tax Authority, Small Business Relief page, checked .
What is small business relief and who qualifies?
Revenue means the company's revenue, tested against AED 3,000,000. The test counts the current period and every earlier tax period, so history matters. A company that passed the limit once cannot treat that year as if it never happened. The rule sits in Article 21 of the corporate tax law (Federal Decree-Law No. 47). Source: Federal Tax Authority, Small Business Relief page, checked .
When does small business relief end?
It applies to tax periods starting on or after . The original end date was periods ending on or before . Ministerial Decision No. 131, issued , extends it to subsequent periods ending on or before . So the relief has not ended. Source: Ministry of Finance, Ministerial Decision No. 131, checked .
Who cannot use small business relief?
- A Qualifying Free Zone Person. See qualifying free zone person.
- A member of a multinational group with consolidated revenue above AED 3.15 billion.
- A non resident. The relief is for resident taxable persons.
Source: Federal Tax Authority, Small Business Relief page, checked .
What do you give up by electing relief?
The relief is not free of trade offs. If you elect it, you lose these for that period:
- Exempt income treatment
- Reliefs
- Deductions
- Tax loss relief
Source: Federal Tax Authority, Corporate Tax law Article 21, checked .
That matters if you made a loss. Say a company has a loss in one period and expects profit later. Electing in the loss year may remove the chance to use that loss, because the election removes tax loss relief for that period. Work out both options before you elect.
A worked comparison
Take a company whose revenue is under the limit but whose taxable income is above AED 375,000. Without the election, the first AED 375,000 is taxed at 0% and the rest at 9%. With the election, it is treated as having no taxable income, so no tax is due for that period. Now add a tax loss brought forward from an earlier period. Without the election, that loss can reduce this period's income. With the election, it cannot be used for that period. The better answer depends on your own figures, so run both before the return is filed.
A second point is timing. The election is per period, so you can use it in one period and drop it in the next. Dropping it later does not undo a past election, and losses made in an electing period may not be usable the way you expect. Ask your adviser to write down the effect period by period.
Do I still register and file with relief?
Relief does not remove your duties. You still need to register for corporate tax and file a return, since the election is made there. See corporate tax return filing for the deadline and penalties. Records are kept for 7 years after the period end.
Relief against the normal rate
Without the relief, taxable income up to AED 375,000 is taxed at 0% and the rest at 9%. A very small company may owe nothing either way. The relief matters most when income is above AED 375,000 but revenue stays at or under the limit. Revenue and profit are different things, so check which one you are comparing.
Source: Federal Tax Authority, Corporate Tax rates, checked .
Get help deciding
If your numbers sit near the line, or you have losses, ask a corporate tax consultant to model both positions. The form on this page asks firms for quotes.
