The UAE Corporate Tax regime has entered its consolidation phase. Measures introduced as transitional are now being tested against economic reality and, where they prove effective, extended.
Small Business Relief was due to expire with the Tax Periods ending on 31 December 2026. With Ministerial Decision No. 131 of 2026, issued on 29 July 2026, the Ministry of Finance has amended Article 2(2) of Ministerial Decision No. 73 of 2023 and extended the relief to Tax Periods ending on or before 31 December 2029.
Three additional Tax Periods. No change to the mechanics, no change to the threshold — simply more time.
For eligible businesses the advantage is material and quantifiable. But the relief remains elective, conditional and, in one critical respect, irreversible: an opportunity for those who plan for it, a loss for those who assume it applies automatically.
What the relief actually does
Under Article 21 of Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 73 of 2023, a Resident Person — whether a natural or a juridical person — whose Revenue does not exceed AED 3,000,000 in the relevant Tax Period and in all previous Tax Periods may elect to be treated as having no Taxable Income.
The election delivers two distinct benefits:
- tax relief: no Corporate Tax is payable for the Tax Period;
- administrative relief: no computation of Taxable Income, a simplified Tax Return, and, notably, no transfer pricing documentation requirements.
The value is proportionate to profitability. A business with Revenue of AED 2,800,000 and profit of AED 1,500,000 would otherwise pay AED 101,250 of Corporate Tax in a single Tax Period. Repeated across three further periods, the relief becomes a genuine cash-flow and compliance advantage, not a marginal concession.
Who cannot access it
Three categories are excluded regardless of Revenue: constituent companies of:
- Multinational Enterprise Groups with consolidated group revenue of at least AED 3.15 billion;
- Qualifying Free Zone Persons, which already benefit from the 0% rate on Qualifying Income; and branches of foreign entities. A Free Zone Person that does not meet the QFZP conditions remains eligible;
- Branches of foreign entities, UAE branches or Permanent Establishments of foreign entities are generally treated as Non-Resident Persons, and Small Business Relief is available only to Resident Persons.
For Tax Groups, the threshold applies to the Group as a single Taxable Person: what matters is the consolidated Revenue, not the position of each individual member.
Revenue is not what most businesses assume
This is where eligibility is most frequently misjudged.
Revenue means gross income, not profit. It includes the proceeds from the sale of business assets, non-cash receipts at market value and, for juridical persons, foreign income. VAT collected is excluded, as it never belongs to the business.
Critically, the Exempt Income rules do not apply to a person seeking the relief. Dividends received from UAE companies, which would ordinarily be excluded from Taxable Income, must be included in the Revenue test. A company with AED 2,500,000 of sales and AED 1,000,000 of UAE dividends is not eligible.
The election is not automatic — and not always advisable
Eligibility does not grant the relief. The Taxable Person must be registered for Corporate Tax, hold a TRN and make the election in the Tax Return, for each Tax Period. Once a return has been filed without the election, the benefit cannot be recovered at a later stage.
There is also a cost side, which deserves a calculation rather than an assumption. In a Tax Period covered by the election, Tax Losses cannot be accrued, utilised or transferred, Net Interest Expenditure cannot be carried forward, and relief for transfers within a Qualifying Group and Business Restructuring Relief are unavailable. For a start-up in a loss position, or a leveraged business, electing may destroy more value than it saves.
Records must be retained for seven years.
Artificial separation: the line not to cross
Fragmenting a business across multiple entities so that each remains below the threshold is expressly treated as a Corporate Tax advantage under the General Anti-Abuse Rule.
The FTA applies a two-limb test: whether the separation was undertaken for a valid and genuine commercial purpose, and whether substantially the same Business is being conducted. The assessment looks at the financial, economic, organisational and structural links between the entities, and the separation may be functional, geographical or temporal. Where it is established, unpaid Corporate Tax is recovered and penalties may be imposed.
Operating through more than one company is legitimate and common. What matters is whether the architecture is genuine — and whether it can be demonstrated.
Fidinam: turning an extension into a strategy
Three additional Tax Periods are an opportunity only if they are actively managed. Fidinam supports businesses, entrepreneurs and international groups in the UAE with:
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eligibility assessment and review of the Revenue threshold across all prior Tax Periods;
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quantification of whether electing is genuinely advantageous, tested against Tax Losses, interest position and group relief;
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management of the election and of the simplified filing in each Tax Period;
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review of group structures against artificial separation risk;
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transition planning for the Tax Period in which the threshold — or 2029 — is reached.
With offices worldwide and a fully integrated, multidisciplinary approach, Fidinam combines UAE tax, corporate and compliance expertise with cross-border coordination, assisting clients in securing the benefit today and preparing for the moment it ends.
This article is edited by Iacopo Carraro, Tax Manager Italian Desk, and Abdullah Al Salman, Tax Manager at Fidinam Dubai. If you require clarification or wish to request a tax consultancy, please use the form below.
