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 the relief does
A business that elects Small Business Relief is treated as having no taxable income for that tax period, so no Corporate Tax is payable, whatever its profit. The election is made in the Corporate Tax return.
The revenue test
The relief is available to resident persons whose revenue is AED 3 million or less in the tax period and in every previous tax period. Revenue means gross income for the period, not profit. Once revenue goes above AED 3 million in any period, the relief is no longer available for later periods, even if revenue falls back.
It applies to tax periods starting on or after 1 June 2023 and ending on or before 31 December 2026. For a December year-end business, 2026 is therefore the last year it can be used unless the rules are extended, so check the Federal Tax Authority's latest guidance before relying on it.
Who cannot use it
- Qualifying Free Zone Persons, who have their own regime.
- Members of large multinational groups, with consolidated group revenue above AED 3.15 billion.
- Businesses that have split themselves artificially to stay under the threshold. The FTA can deny the relief and apply penalties.
What you give up
The relief has a cost that matters for loss-making or early-stage businesses. Tax losses incurred in a period where you elect the relief cannot be carried forward to use against future profits, and the same applies to disallowed net interest expenditure.
| Scenario | Elect relief? | Why |
|---|---|---|
| Profitable, revenue AED 2.4m | Usually yes | No tax on profits above AED 375,000 |
| Loss of AED 600,000, expects profits from 2027 | Think carefully | Electing loses the AED 600,000 loss that could reduce future tax |
| Taxable income below AED 375,000 anyway | Mostly a simplification | 0% band already applies; relief mainly reduces compliance work |
Illustrative scenarios. The right answer depends on your expected profits after the relief ends.
Small Business Relief removes the tax. It does not remove the need to register, file and keep records.
What you still have to do
- Register for Corporate Tax on EmaraTax.
- File a return for each tax period and make the election in it, within nine months of the year-end.
- Keep financial records that support your revenue figure. Businesses using the relief may prepare financial statements on a cash basis in some cases, but revenue must still be evidenced.
- Price related-party transactions at arm's length. Transfer pricing documentation is not required while the relief applies, but the arm's length principle still is.
Plan for 2027
If the relief ends as scheduled, businesses that relied on it will move to the standard regime: 0% on the first AED 375,000 of taxable income and 9% above it. Now is the time to tidy up bookkeeping, separate personal and business spending, and make sure the accounts can support a full taxable income calculation. See how the AED 375,000 threshold works.
This article is general information based on UAE Corporate Tax rules as published by the Federal Tax Authority and the Ministry of Finance. It is not advice for your business. Ask Hassan whether electing the relief makes sense for you.
Official sources: Federal Tax Authority · UAE Ministry of Finance
