With the introduction of the UAE Corporate Tax regime under Federal Decree-Law No. 47 of 2022, many startups and small to medium enterprises (SMEs) have voiced concerns about increased financial and compliance burdens. In response, the Ministry of Finance has rolled out a much-needed initiative — the Small Business Relief Scheme. Designed to ease the tax burden for qualifying entities, this scheme offers a range of benefits to help small businesses transition smoothly into the corporate tax era.
This blog will explore the key aspects of the Small Business Relief Scheme, who qualifies for it, how it works, and what implications it holds for startups and SMEs operating in the UAE.
1. What Is the Small Business Relief Scheme?
The Small Business Relief Scheme is a special provision within the UAE Corporate Tax framework, aimed at supporting smaller businesses by relieving them from the complexity and cost of full tax compliance—if their revenue remains below a certain threshold.
This initiative aligns with the UAE government’s vision to nurture entrepreneurship and create a competitive SME ecosystem while still ensuring a fair and robust tax framework.
2. Revenue Threshold for Eligibility
According to Ministerial Decision No. 73 of 2023, a taxable person can claim Small Business Relief if their revenue in the relevant tax period (and previous tax periods) does not exceed AED 3 million.
- The AED 3 million threshold applies to tax periods starting on or after June 1, 2023.
- It will remain in effect until the end of the tax period ending on or before December 31, 2026.
If the revenue crosses this threshold in any tax period, the entity will no longer be eligible for relief in that period and subsequent ones, even if its revenue later drops below the limit.
3. Who Qualifies for Small Business Relief?
The scheme is available to:
- Resident juridical persons (such as LLCs)
- Individuals conducting business or professional activities in the UAE
However, certain businesses are excluded from claiming relief, including:
- Qualifying Free Zone Persons
- Members of multinational enterprise (MNE) groups with global revenues over AED 3.15 billion
Additionally, entities that elect not to apply the Small Business Relief (e.g., for tax loss carryforward or other strategic reasons) must indicate this in their Corporate Tax return.
4. Benefits of the Scheme for Startups and SMEs
The relief provides multiple advantages to eligible small businesses:
- No Corporate Tax Liability: Businesses with revenue below the threshold will have a 0% Corporate Tax rate.
- Simplified Compliance: Reduced documentation and reporting requirements for businesses not subject to tax.
- Cash Flow Protection: No need to set aside funds for Corporate Tax payments, preserving liquidity.
- Focus on Growth: Startups can reinvest profits into expansion and development without immediate tax pressure.
5. PEAK Business Consultancy Services – Supporting Your Business Journey
PEAK Business Consultancy Services is a trusted VAT and Corporate Tax advisor helping UAE startups and SMEs comply with tax laws while maximizing available reliefs and exemptions. Our team ensures that your business is fully aware of its eligibility for the Small Business Relief Scheme and supports you in making strategic tax decisions.
Our services include:
- Evaluating eligibility for Small Business Relief
- Filing Corporate Tax returns correctly with appropriate elections
- Advising on long-term tax planning and revenue projections
- Assisting with VAT registration and record-keeping
- Ensuring FTA compliance and audit readiness
Visit us at https://www.peakbcs.com/ to get started on your compliance journey today.
6. Limitations and Considerations
Although the scheme offers considerable relief, businesses must consider several factors before relying on it:
- No Loss Carryforward: Businesses electing Small Business Relief cannot carry forward tax losses or disallowed interest expenses to future periods.
- Revenue Forecasting Is Crucial: Companies close to the AED 3 million threshold should monitor their growth carefully to avoid unexpected disqualification.
- Election Required: Businesses must affirmatively elect to apply the relief when filing their tax return. It is not applied automatically.
- Transitioning Out: Once a business exceeds the revenue cap, it will need to meet full Corporate Tax compliance requirements in the subsequent tax period.
7. How to Elect for Small Business Relief
The election for Small Business Relief is made as part of the Corporate Tax return. Here’s what businesses should do:
- Ensure proper financial records confirming revenue below AED 3 million
- Indicate the election clearly in the relevant tax return submission
- Maintain documentation that substantiates eligibility
- Seek professional advice to ensure the election aligns with long-term tax planning
8. Documentation and Record-Keeping
Even if a business qualifies for Small Business Relief and is not liable for tax, it must still maintain proper financial records as per the Corporate Tax Law. This includes:
- Profit and loss accounts
- Revenue reports
- Bank statements
- Contracts and invoices
- Audit reports (if applicable)
Failure to maintain adequate records can result in penalties—even if no tax is due.
9. The Strategic Importance of Professional Tax Planning
Choosing whether or not to apply for Small Business Relief should be a strategic decision. For instance, startups anticipating rapid growth or planning to raise external funding may prefer to forgo relief in favor of building up tax loss carryforwards and interest deductions.
This is where professional tax advisors like PEAK Business Consultancy Services add value by offering bespoke guidance tailored to your business model, goals, and financial forecasts.
Ready to make the right decision for your startup? Talk to our experts by visiting https://www.peakbcs.com/.
10. Conclusion
The Small Business Relief Scheme is a landmark initiative that makes the UAE’s Corporate Tax regime more inclusive and startup-friendly. For thousands of entrepreneurs and SMEs across the country, it provides an important cushion during the early growth phase. However, strategic planning, careful financial monitoring, and accurate documentation remain essential to make the most of this opportunity.
Whether you’re eligible now or planning ahead for when your business crosses the threshold, PEAK Business Consultancy Services is here to help. Our team provides end-to-end support—from eligibility assessment to return filing and strategic advisory—ensuring that your business stays compliant while capitalizing on tax-saving opportunities.
Visit https://www.peakbcs.com/ and take the first step toward tax-smart business growth in the UAE.
