Small Business Relief extended to 2029: what it changes, and what it does not

On 7 August 2026 the Ministry of Finance issued Ministerial Decision No. 131 of 2026, amending the 2023 decision that created Small Business Relief and extending it by three years. The relief was due to run out at the end of this year. It will now apply to tax periods ending on or before 31 December 2029, with the AED 3 million revenue threshold unchanged.

For a large number of the companies we work with, that is the most useful piece of UAE tax news this year. It is also, quietly, a change that rewards businesses which have their compliance in order and does nothing at all for those which do not.

What exactly has changed?

Only the end date. Small Business Relief was introduced by Ministerial Decision No. 73 of 2023 and was expressed to apply to tax periods ending on or before 31 December 2026. The new decision moves that date to 31 December 2029. The eligibility threshold, the conditions, and the mechanics are all as they were.

What has not changed is worth stating as clearly as what has. The threshold is still AED 3 million of revenue. The relief is still an election rather than an automatic entitlement. The exclusions still apply. Anyone reading the headline as a general tax holiday for small companies will be disappointed by the detail.

What does Small Business Relief actually do?

Where a business elects for it and qualifies, it is treated as having no taxable income for that tax period, and gets a materially lighter compliance burden with it, including relief from the full transfer pricing documentation requirements.

Note the mechanism. The relief does not lower a rate. It removes taxable income for the period, which is why the interaction with losses matters so much, and we come to that below.

Who can use it?

UAE resident taxable persons whose revenue does not exceed AED 3 million in the relevant tax period. Revenue, not profit. A business turning over AED 4 million while making a loss is outside the relief; a business turning over AED 2 million and making a healthy margin is inside it.

Two categories are excluded outright. Qualifying Free Zone Persons cannot elect for Small Business Relief, because they already sit within a separate regime offering 0% on qualifying income. Members of multinational enterprise groups with consolidated group revenue above AED 3.15 billion are also excluded, which is aimed at large groups rather than the businesses the relief is designed for.

That first exclusion catches people out. A free zone company that has structured itself carefully to qualify for the 0% qualifying income rate is choosing a different route, not stacking two reliefs. A free zone company that has not met those conditions and is therefore not a Qualifying Free Zone Person is in a different position again, and should look at whether Small Business Relief is available to it.

The trap: what electing costs you

This is the part that gets skipped, and it is the part that occasionally makes electing the wrong answer.

Carried forward tax losses and disallowed net interest expenditure can only be used in tax periods where Small Business Relief is not elected. A business sitting on accumulated losses from its early years, which expects to become comfortably profitable, may be better served by not electing in a marginal year and preserving the ability to shelter later profits with those losses.

That calculation depends on the size of the losses, the profit trajectory, and how close the business is to the AED 3 million ceiling. It is arithmetic rather than judgement, but it needs doing rather than assuming. The extension to 2029 makes it more valuable to do properly, because there are now four more years of elections to plan across rather than one.

The other trap: splitting the business

A revenue ceiling invites an obvious idea, and the legislation anticipated it. Where a business is artificially separated so that each part sits below AED 3 million, the general anti-abuse rule allows the Federal Tax Authority to make compensating adjustments to the corporate tax liability.

Commercially genuine separate businesses are a different matter entirely, and plenty exist. The distinction is whether the structure would exist if the threshold did not, and that is the question the authority will ask.

What this means if you are establishing now

It shifts the arithmetic for smaller businesses choosing between a free zone and a mainland licence, and not always in the direction people expect.

The 0% qualifying income rate available to a Qualifying Free Zone Person comes with cumulative conditions: adequate substance in the zone, qualifying income, transfer pricing compliance, audited financial statements, and non-qualifying revenue held below the lower of 5% of revenue or AED 5 million. Fail any one and the rate is lost for that year and the four that follow.

A mainland company below AED 3 million of revenue electing Small Business Relief reaches a similar tax outcome for the next four years with a fraction of that machinery. It is not a better answer in every case, and there are many reasons other than tax to choose a free zone, but it is now a genuinely competitive one for a small services business selling into the UAE. We set out the wider decision in our guide to choosing between a free zone and a mainland licence.

What to do now

If you are already electing, nothing changes today beyond the fact that you can keep electing for longer. It is still worth modelling the loss position across the extended window rather than electing reflexively each year.

If you have never looked at it, check your revenue against the threshold for each tax period rather than for the business in general, confirm you are not a Qualifying Free Zone Person or part of a large group, and make the election in the corporate tax return itself. It is not automatic, and it is not applied for you.

If you are close to the ceiling, model both sides before the year end rather than after it. The decisions that determine which side of AED 3 million you land on are commercial ones taken during the year, not accounting ones taken after it.

If you are establishing rather than reviewing

If this has shifted your thinking on where to establish, our free quote tool gives an indicative figure for either a mainland or a free zone structure, and the visa eligibility check covers the residency side.

Begin a conversation

If you want to know whether electing is right for your position, or whether your structure is in the right place now that the relief runs to 2029, an initial conversation lasts thirty minutes, is by appointment, and is without charge or obligation.

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Written 9 August 2026, following Ministerial Decision No. 131 of 2026 announced on 7 August 2026. Tax rules change and the treatment of any particular business depends on facts specific to it. Nothing here is advice on your own position.