As a small business owner in the UAE, there’s promising news on corporate tax relief, along with a few strategic decisions you’ll want to consider carefully. The Federal Tax Authority (FTA) has just released clear guidelines on how you can handle your interest expenses and whether or not it makes sense to opt for the Small Business Relief (SBR) scheme between 2024 and 2026.
Let’s break it down so it’s easy to understand and apply to your business.
What is the Small Business Relief (SBR)?
The UAE introduced a 9% corporate tax for businesses. But to support smaller entities, the government rolled out the Small Business Relief program under Article 21 of the UAE Corporate Tax Law, supported by Ministerial Decision No. 73 of 2023.
Here’s how it works:
If your annual revenue is AED 3 million or less in any of the years between 2024–2026, you can apply for SBR. If approved, you won’t be subject to corporate tax during that period.
However, there are some trade-offs, especially when it comes to interest expenses.
Important: If your revenue exceeds AED 3 million in any tax period from 2024 to 2026, you will no longer be eligible for SBR from that year onward.
A Strategic Choice: Opt In or Out of SBR?
The new guidelines give small businesses a lot more clarity and flexibility. But that also means the decision to opt into SBR or not should be strategic. If you’re a profit-making small business under AED 3M revenue, SBR might be the right short-term play. If you’re loss-making or planning long-term growth, skipping SBR now could save you more later via interest and tax loss deductions.
Does Small Business Relief (SBR) apply to Free Zone companies in the UAE?
Yes, free zone businesses can qualify for SBR, but only if they meet certain conditions just like mainland companies.
To qualify for SBR as a Free Zone entity, you must:
• Be a “Resident Person” under the UAE Corporate Tax Law
• Have revenue ≤ AED 3 million in any of the years 2024, 2025, or 2026.
• Not be part of a Multinational Enterprise Group (MNE) (i.e., global revenues ≥ AED 3.15 billion).
• Not be a Qualifying Free Zone Person (QFZP) choosing the 0% tax benefit on qualifying income.
However, if you don’t qualify as a QFZP but your annual revenue is AED 3 million or less, opting for SBR can exempt you from corporate tax entirely until the end of 2026. This makes it a simple and effective choice for small, profitable businesses that don’t need to claim interest deductions or carry forward losses.
On the other hand, if you’re not a QFZP and your business is in an early or investment-heavy stage you might be better off skipping SBR so you can carry forward those deductions for up to 10 years. You can then offset them against future profits when you become taxable, making this a more strategic long-term play.
Navigating the UAE’s evolving corporate tax landscape doesn’t have to be overwhelming, especially for startups and SMEs setting up in Dubai’s Free Zones. With the right guidance and strategic planning, you can make informed decisions that support both your short-term savings and long-term growth.
At Chart Accountancy, we specialize in helping entrepreneurs understand the fine print of business setup and tax structuring, ensuring you’re fully compliant. Get in touch with us today.
Source: IFZA - https://ifza.com/en/uae-corporate-tax-relief-small-business/
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