Key takeaways
- Small Business Relief now covers tax periods ending on or before 31 December 2029, under Ministerial Decision No. 131 of 2026.
- The AED 3 million revenue test still covers every previous tax period, so one period over the limit ends eligibility for good.
- Electing still means registering, filing a simplified return within nine months and keeping records.
- In a loss year, electing saves nothing and forfeits the loss, so a full return is usually the better choice.
Small Business Relief (SBR) was due to end with tax periods ending on 31 December 2026. Ministerial Decision No. 131 of 2026, issued on 29 July and announced by the Ministry of Finance on 7 August, extends it to tax periods ending on or before 31 December 2029. For a calendar-year business that means three more years of potential relief, FY2027 to FY2029. Only the end date has moved, however. Every other condition stands, and for owners with several entities, family groups and subsidiaries of larger groups, those conditions decide far more than the date does.
What Small Business Relief does
An electing business is treated as having no taxable income for the period (Federal Decree-Law No. 47 of 2022, Art. 21). The choice is made period by period, in the corporate tax return. The relief is open to resident companies and to individuals trading in their own name, provided revenue is AED 3,000,000 or less in the period and in every previous tax period.
The value is straightforward to measure. Take a consultancy with revenue of AED 2.6 million and taxable income of AED 700,000. Without SBR, it pays 0% on the first AED 375,000 and 9% on the remaining AED 325,000, which is AED 29,250. With SBR, it pays nothing.
Where taxable income is AED 375,000 or less, the tax is nil either way. SBR only saves tax on profit above that band.
Before and after Ministerial Decision No. 131 of 2026
The decision replaces Art. 2(2) of Ministerial Decision No. 73 of 2023, the provision that sets the end date. The revenue test, the exclusions and the other conditions are unchanged.
| Before | After | |
|---|---|---|
| Tax periods covered | Ending on or before 31 December 2026 | Ending on or before 31 December 2029 |
| Revenue test | AED 3m or less in the period and every previous period | Unchanged |
| Who cannot elect | QFZPs; members of MNE groups with consolidated revenue of AED 3.15bn or more | Unchanged |
| Compliance | Register, file a simplified return within nine months, keep records | Unchanged |
| Losses and net interest from SBR periods | Cannot be carried forward | Unchanged |
| Splitting a business to stay under AED 3m | Caught by the anti-abuse rule | Unchanged |
What counts is when the tax period ends, not when it starts, which matters for any business without a 31 December year end:
| Tax period ending | Before | After |
|---|---|---|
| 31 December 2026 | Eligible | Eligible |
| 30 June 2027 | Not eligible | Eligible |
| 31 December 2029 | Not eligible | Eligible |
| 31 March 2030 | Not eligible | Not eligible |
"Eligible" assumes the revenue test and every other condition are met.
What the extension did not change
The AED 3 million test still looks back
Revenue is measured under accounting standards, and the test covers the current period and every previous tax period. A single period above AED 3 million removes the relief permanently. A business with revenue of AED 3.2 million in FY2024 cannot elect for FY2025 or any later period, even if revenue falls back to AED 2.5 million. The extension does not reset that history.
Some summaries describe the look-back as covering only previous periods ending on or before 31 December 2026. That wording is not in the decision. The test still covers every previous period.
The exclusions
Two kinds of business cannot elect, whatever their revenue (Ministerial Decision No. 73 of 2023, Art. 3). The first is a Qualifying Free Zone Person (QFZP), the free zone company taxed at 0% on qualifying income. The second is a member of a multinational enterprise (MNE) group as defined in Cabinet Decision No. 44 of 2020, meaning a group with consolidated revenue of AED 3.15 billion or more. A small UAE subsidiary of such a group remains excluded however modest its own figures.
Registration, filing and records still apply
SBR is an election in the return, not an exemption from the system. The business must be registered, file a simplified return within nine months of the end of the period, and keep records for seven years. The Federal Tax Authority (FTA) confirmed on 3 August 2026 that SBR returns must be filed within the legal deadline, and a late return costs AED 500 a month or part month even when no tax is due. For calendar-year businesses, the FY2025 return is due by 30 September 2026; the deadline finder confirms other year ends.
Losses and interest from SBR years are lost
Tax losses and net interest expenditure from a period in which SBR is elected cannot be carried forward (Ministerial Decision No. 73 of 2023, Arts. 4 and 5). Losses from earlier periods in which the business did not elect do carry forward, but only into later periods in which it does not elect either.
Transfer pricing still applies
Dealings with related parties must still be at arm's length, the price independent parties would agree. The FTA's SBR guidance does not require electing businesses to keep a Master File or Local File.
When electing costs money: the loss year
In a loss year there is no tax to save, so electing SBR gains nothing and forfeits the loss. For a growing business, the cost arrives later.
In FY2026, revenue is AED 1.8 million and the tax loss is AED 250,000. In FY2027, revenue grows to AED 3.4 million, which puts SBR permanently out of reach, and taxable income before losses is AED 900,000.
| FY2027 (AED) | Elected SBR in FY2026 | Did not elect in FY2026 |
|---|---|---|
| Taxable income before losses | 900,000 | 900,000 |
| Loss available from FY2026 | 0 | 250,000 |
| Loss used (limit: 75% × 900,000 = 675,000) | 0 | 250,000 |
| Taxable income | 900,000 | 650,000 |
| Tax at 9% above AED 375,000 | 47,250 | 24,750 |
Electing in the loss year saved nothing in FY2026 and cost AED 22,500 in FY2027. Had revenue stayed under AED 3 million and the business elected again in FY2027, the loss would simply wait for the first later period without an election.
The same reasoning applies to any business expecting to pass AED 3 million soon. A loss preserved now is worth most in the years when 9% will be payable.
The anti-fragmentation rule
The AED 3 million limit invites an obvious idea: divide the business. Ministerial Decision No. 73 of 2023, Art. 6 addresses it directly. Artificially separating a business to stay under the limit is treated as an arrangement under the Corporate Tax Law's general anti-abuse rule (Art. 50), which allows the FTA to counteract the tax advantage, in this case the relief.
Consider a consultancy with revenue of AED 4.6 million that moves half its clients into a new company with the same owners, so that each reports AED 2.3 million and elects SBR. That is the arrangement the rule targets. The same principle protects the AED 375,000 band: there is one band per taxable person, and splitting a business to multiply it is treated as abuse. Businesses that are genuinely separate, each with its own commercial rationale, are not the target. Family groups and owners with several companies should nonetheless keep a written record of why each entity exists.
A note on the AED 1 million figure
Some coverage of the extension suggested that corporate tax applies only once turnover passes AED 1 million. That threshold is for individuals trading in their own name (Cabinet Decision No. 49 of 2023), not for companies. An individual whose business turnover is between AED 1 million and AED 3 million must register and file, and can elect SBR. See freelancers and sole establishments.
What to do now
- Pull revenue for every tax period to date and confirm none exceeded AED 3 million.
- For FY2025 and each later period, decide whether to elect, and model any loss year before filing.
- Check the exclusions for any free zone entity or any company in a large group.
- Run the figures through the corporate tax calculator.
How ebs can help
ebs Chartered Accountants is an FTA Registered Tax Agency (TAN 30022834). We test your revenue history against the AED 3 million rule, model whether electing makes sense in each period, and prepare and file the return. See Small Business Relief or book a free first consultation.
This article is general information as at 12 August 2026, not advice on your specific circumstances. Tax rules change; check the current position before acting.