https://news.bloombergtax.com/: The United Arab Emirates has extended its Corporate Tax Small Business Relief, or SBR, until the end of 2029, giving startups, entrepreneurs and small and medium-sized enterprises another three years to potentially operate without paying corporate tax.

The extension reinforces the UAE’s policy of helping smaller businesses.

The development is particularly significant for entrepreneurs and growing businesses, for whom the 3 million UAE dirham ($817,000) revenue threshold provides considerable room to build and scale a business before the normal corporate tax rules become fully relevant.

For the UAE, it reinforces a broader objective: introducing a modern corporate tax system without losing its position as one of the region’s most attractive jurisdictions in which to start and grow a business.

What is the Small Business Relief? The SBR allows an eligible taxpayer to elect to be treated as having derived no taxable income for the relevant tax period by opting for this in the relevant tax return. The result is effectively a 0% corporate tax position.

Under the original rules, introduced in 2023, taxable persons resident in the UAE were eligible if their annual revenue was 3 million UAE dirham or less. The relief was available only for periods ending on or before Dec. 31, 2026. The new decision extends that timeframe until Dec. 31, 2029.

Importantly, the 3-million threshold refers to revenue, rather than profit. For example, a business generating 2.9 million UAE dirham of revenue may potentially elect for the relief regardless of its profit margin, provided the remaining conditions are satisfied.

Once a taxpayer exceeds the 3 million UAE dirham threshold in a relevant tax period, the relief ceases to be available.

Who qualifies? Natural persons carrying on a business or business activity in the UAE can also fall within the corporate tax regime. However, they only become subject to corporate tax once turnover from taxable business activities exceeds 1 million UAE dirham in a calendar year.

The SBR extension affects all taxable persons, including those entrepreneurs whose revenue is between 1 and 3 million UAE dirham and could potentially be subject to corporate tax.

The relief is therefore relevant not only for startups and small and medium-sized enterprises operating through companies, but also for eligible entrepreneurs and sole proprietors.

There are important limitations. The relief is only available to resident persons. In addition, qualifying free zone persons and members of large multinational groups falling within the scope of the Organization for Economic Cooperation and Development Pillar Two global minimum tax rules are explicitly excluded.

The regime also contains anti-abuse provisions. Businesses can’t artificially split their activities among different persons or entities simply to individually remain below the 3 million UAE dirham threshold.

It’s not suitable for every taxpayer. There is no free lunch in the world of taxation. Opting in for the SBR comes with trade-offs.

A taxpayer that opts in for the SBR loses certain tax benefits during that year, such as the ability to carry forward tax losses and unused net interest expenditure, as well as various tax exemptions, reliefs and deductions.

Taxpayers that incur significant initial losses, or that would otherwise benefit from special tax provisions, should consider whether electing for the relief is the optimal approach.

A Broader Message
The importance of the SBR extension goes beyond the immediate tax saving.

With incorporation costs, trade license annual renewal requirements and ongoing regulatory obligations, the UAE is comparatively expensive in worldwide terms. Its appeal has traditionally rested elsewhere: low taxation, business-friendly regulation, access to international markets and an environment designed to attract sustainable businesses and investment.

When the UAE introduced its federal corporate tax regime in 2023, it faced the challenge of introducing a new direct tax without undermining one of the country’s traditional advantages — its attractiveness to entrepreneurs and internationally mobile businesses.

The SBR’s 3 million UAE dirham threshold is one of the mechanisms used to balance those competing objectives. This annual revenue threshold is substantial for a small business. A consultant, technology startup, professional services firm or other owner-managed business can potentially build a meaningful operation before corporate tax becomes due.

The UAE is sending a clear policy message that it’s determined to maintain a lighter tax environment for smaller businesses during their early stages of growth.

For startups, entrepreneurs and small to medium-sized enterprises with annual revenue below the threshold, the extension provides three additional years of breathing room.

The SBR extension reinforces the UAE’s position as a hub for entrepreneurs and small and medium-sized enterprises. The country has introduced a modern corporate tax system while continuing to preserve meaningful advantages for smaller businesses. For founders considering where to establish and scale a business, the extension of the SBR until 2029 is another positive signal that entrepreneurship and business growth remain central to the UAE’s economic strategy.