UAE Corporate Tax: what changes at the AED 375,000 threshold
How the 0% and 9% bands work and what to prepare before your first return.
What changed
Ministerial Decision No. 131 of 2026, signed on 29 July 2026, rewrites one clause of the original relief decision, Ministerial Decision No. 73 of 2023. The old wording stopped the relief at tax periods ending on or before 31 December 2026. The new wording keeps it available for tax periods that end on or before 31 December 2029. The Ministry announced the extension on 7 August 2026.
That is the whole change. The revenue limit, the exclusions and the effect of electing are exactly as they were.
Which years are now covered
The test is the date your tax period ends, not the date it starts. That matters for businesses whose financial year does not follow the calendar.
| Financial year-end | Last period that can use the relief | First period under the standard regime |
|---|---|---|
| 31 December | Year ending 31 December 2029 | Year ending 31 December 2030 |
| 31 March | Year ending 31 March 2029 | Year ending 31 March 2030 |
| 30 June | Year ending 30 June 2029 | Year ending 30 June 2030 |
Illustrative, for standard twelve-month periods and assuming the business stays eligible throughout. A shortened or extended first period needs its own check.
What has not changed
- The revenue limit is still AED 3 million. Revenue, meaning gross income rather than profit, must be AED 3,000,000 or less in the period you elect for and in every earlier tax period. One year above the line ends eligibility for good, even if revenue later falls.
- The same businesses are shut out. Qualifying Free Zone Persons cannot elect, and nor can members of multinational groups with consolidated revenue above AED 3.15 billion, as the FTA's relief page sets out.
- Splitting a business to stay under the limit still fails. If the FTA finds a business was divided artificially, the relief is denied and unpaid tax and penalties follow.
- You still register and file. The relief is claimed inside the Corporate Tax return, so you need a Corporate Tax registration and a return for every period, due within nine months of the period end.
- The arm's length rule still applies to dealings with related parties, even though transfer pricing documentation is not required while you elect.
The extension gives small businesses more time. It does not make the relief automatic, and it does not make it right for everyone.
Electing is a yearly decision
The election is made period by period in the return. The FTA's Small Business Relief guide is clear that a return filed without the election cannot be corrected later to claim it, so the choice needs to be made before you submit.
For a profitable small business the answer is usually easy: elect, pay nothing and file the simpler return. For a business making losses, it is harder. In any period where you elect, tax losses cannot be created or used, and that year's loss is gone for good. The same applies to net interest expenditure. Losses brought forward from earlier years in which you did not elect are kept and wait for the next year you are taxed normally.
| Example position | Likely approach | Reason |
|---|---|---|
| Revenue AED 2.5m, profit AED 600,000 | Elect | No tax, compared with tax on AED 225,000 at 9% without the relief |
| Revenue AED 1.8m, loss AED 300,000, strong growth expected | Weigh it up | Electing gives up a loss that could shelter profits once revenue passes AED 3m |
| Revenue AED 900,000, profit AED 150,000 | Elect for simplicity | Profit sits in the 0% band either way; the gain is lighter compliance |
Round, illustrative figures only. Under the standard regime, taxable income up to AED 375,000 is taxed at 0% and the excess at 9%; see how the AED 375,000 threshold works.
If you expect to pass AED 3 million
The extension helps most where revenue is comfortably below the limit. A business that is growing towards it gains less, because the first year above AED 3 million moves it to the standard regime permanently, whatever the decision says about 2029. For those businesses the questions are practical:
- In which year is revenue likely to cross the line, and are the books ready for a full taxable income calculation by then?
- Is there a loss this year that would be worth more kept than given up?
- Are you relying on the cash basis of accounting? That option is tied to revenue staying at or below AED 3 million, so plan the move to accruals before you need it.
A checklist for December 2026 year-ends
- Confirm revenue history. List revenue for every tax period since you came into Corporate Tax and check none is above AED 3 million.
- Check you are not excluded. Free zone status and group membership both matter.
- Forecast 2027 to 2029. A rough three-year revenue and profit view shows whether the relief is likely to last the full extension.
- Decide on the election before filing. Look at this year's result and any losses before the return goes in.
- Keep the records anyway. Revenue evidence, related-party agreements and clean bookkeeping protect the relief and make the move to the standard regime easier.
For the wider year-end process, see the Corporate Tax return checklist for December year-ends. For how the relief works in more detail, see Small Business Relief: who qualifies and what electing it means, written before the extension was announced.
One note on sources: the FTA's relief guide was published in 2023 and still shows the old 2026 date. The amending decision on the Ministry of Finance site is the legal text, and it governs until the guide is updated.
This article is general information based on Ministerial Decisions No. 73 of 2023 and No. 131 of 2026 and guidance from the Federal Tax Authority and the Ministry of Finance. It is not advice for your business, and rules can change. Ask Hassan whether electing the relief is right for you this year.
Official sources: Ministry of Finance announcement · Ministerial Decision No. 131 of 2026 · Federal Tax Authority: Small Business Relief · FTA Tax Returns guide
