Small Business Relief vs 0% Threshold: Who Actually Qualifies Under UAE Corporate Tax
When the UAE rolled out its Corporate Tax regime in 2023, it marked a new era for local businesses. For the first time, profits were taxed, but the government made sure small players and free zone entities had room to breathe.
That’s where two lifelines come in: Small Business Relief and the 0% Corporate Tax Threshold. Both sound like good news. But here’s the catch: they’re not the same thing, and not everyone qualifies.
Understanding which category you fall into isn’t just about saving money. It’s about staying compliant and avoiding costly errors down the line.
This is where ADEPTS and their team of UAE corporate tax experts step in. From UAE corporate tax consultation to hands-on UAE corporate tax compliance support, they help businesses confidently navigate the maze.
Understanding UAE Corporate Tax Basics
The UAE’s corporate tax system looks simple on paper, with a 9% tax on business profits above a certain limit. But like most tax rules, the details matter.
Businesses earning profits above AED 375,000 are taxed at the standard 9% rate. Anything below that sits in the 0% bracket. Yet, that doesn’t automatically make every small company or freelancer eligible for Small Business Relief (SBR) or the 0% Free Zone rate. The difference lies in how your taxable income and revenue thresholds are calculated.
Taxable income is the profit you report after deducting legitimate business expenses — not the total cash flowing through your bank. The revenue threshold, on the other hand, looks at your overall business turnover. Confusing these two can easily push you out of a relief bracket for which you actually qualified.
The corporate tax regime also interacts closely with other UAE regulations. You must still meet VAT, Economic Substance Rules (ESR), and Corporate Tax audit requirements. Each rule checks that your company has real operations, real income, and proper recordkeeping — something UAE corporate tax consultants and UAE corporate tax services teams help businesses stay on top of.
For companies applying for Small Business Relief or the 0% Free Zone rate, these obligations don’t disappear. They still affect how you handle your accounting, reporting, and bank covenants. Getting the right UAE corporate tax services early on can keep your financial
What is Small Business Relief (SBR)?
Small Business Relief (SBR) helps smaller UAE businesses reduce their corporate tax burden. Under Article 21 of the UAE Corporate Tax Law and Ministerial Decision No. 73 of 2023, businesses with AED 3 million or less in annual revenue (from 2024 to 2026) can enjoy 0% corporate tax.
This is a boost for freelancers, startups, and SMEs. For example:
- A home-based designer can save on taxes while focusing on growth.
- A small logistics firm can reinvest savings into operations.
Key points to remember:
- The relief isn’t automatic. Exceed AED 3 million in revenue, and SBR is lost for that year.
- Tax filing is still required, even if you qualify. Proper documentation is essential.
- SBR limits deductions like interest expenses and prevents carrying forward losses, so it’s a trade-off between simplicity and tax planning flexibility.
Professional UAE corporate tax consultants help businesses elect SBR correctly, maintain records, and stay audit-ready, ensuring you benefit from relief safely and strategically.
What is the 0% Corporate Tax Threshold?
While Small Business Relief (SBR) depends on revenue, the 0% Corporate Tax Threshold depends on profit. Every UAE business, whether mainland or free zone, gets a 0% tax rate on the first AED 375,000 taxable income. Anything above that gets taxed at the standard 9%.
Here’s the simple math:
If your business earns AED 350,000 in taxable profits, you pay zero corporate tax. If it earns AED 450,000 only AED 75,000 (the portion above the threshold) is taxed at 9%.
This threshold is a built-in buffer for smaller profits for mainland businesses. For free zone companies, it often layers with the separate 0% Qualifying Income benefit though eligibility depends on being a Qualifying Free Zone Person (QFZP).
The threshold offers more than just tax savings. It helps businesses plan better, price smarter, and reinvest early profits into operations rather than compliance costs. Many companies work with UAE corporate tax consultants to structure expenses and revenue timing around this limit not to evade tax, but to legally optimize it.
For instance:
- A small retail shop with AED 340,000 in taxable income pays nothing.
- A marketing agency with AED 410,000 pays tax only on AED 35,000.
- A free zone tech startup with AED 320,000 in qualifying income still benefits but must maintain its QFZP status to stay eligible.
The 0% threshold can be a simple yet strategic win when handled right. That’s why many growing firms rely on UAE corporate tax services for forecasting and compliance to ensure their filings align perfectly with their profits.
Eligibility for 0% Corporate Tax in Free Zone Companies (QFZP)
Not every UAE free zone company automatically qualifies for the 0% corporate tax rate. To benefit, a business must meet the Federal Tax Authority’s definition of a Qualifying Free Zone Person (QFZP) and continue to satisfy the conditions each year.
A QFZP is a registered free zone entity that earns Qualifying Income from permitted activities, maintains adequate substance in the UAE, and complies with relevant laws. The requirements are strict but clear.
Key conditions for QFZP eligibility:
- Free Zone Establishment: Be registered and hold a valid commercial license in a UAE free zone.
- Qualifying Income: Earn revenue from permitted activities such as manufacturing, logistics, or R&D. Non-qualifying income is limited by the de-minimis rule.
- Adequate Substance: Maintain real operations in the UAE, including staff, office space, and business activity.
- Compliance: Follow transfer pricing rules and maintain proper documentation.
- Election Status: Do not opt to be taxed under the regular corporate tax regime, as this can affect QFZP eligibility.
De-minimis Rule: If more than 5% of total income (or AED 5 million, whichever is lower) comes from non-qualifying activities, the 0% rate may be lost for that period.
Mainland Sales: A free zone company can still qualify as a QFZP even if it sells to mainland clients, provided all other eligibility conditions are met and relevant rules for income sourcing, substance, and documentation are followed.
Professional UAE corporate tax consultants often advise free zone entities to separate qualifying and non-qualifying revenue streams and maintain clear records. This ensures compliance, simplifies reporting, and safeguards the 0% tax advantage.
Quick Reference:
| Condition | Requirement | Risk if Ignored |
|---|---|---|
| Free Zone Establishment | Valid license and registration | Loss of QFZP status |
| Qualifying Income | Revenue from eligible activities; mainland sales allowed if rules are met | Entire income taxed at 9% if non-qualifying income exceeds de-minimis threshold |
| Substance in the UAE | Real office, staff, and business activity | Disqualification |
| Transfer Pricing Compliance | Maintain documentation | Penalties, audits |
| De-minimis Rule | ≤ 5% non-qualifying revenue (or ≤ AED 5 million) | Loss of 0% rate |
Maintaining QFZP status is an ongoing responsibility, not a one-time task. UAE corporate tax services and compliance specialists help with record-keeping, audit support, and reporting, ensuring your free zone business retains its tax benefits safely.
Comparing Small Business Relief and the 0% Threshold
If you are still unsure whether your business qualifies for Small Business Relief (SBR) or the 0% Corporate Tax Threshold, here’s a quick side-by-side look to clear it up.
| Feature | Small Business Relief (SBR) | 0% Corporate Tax Threshold |
|---|---|---|
| Eligible Entities | Small businesses with revenue ≤ AED 3M; resident companies not part of an MNE | Any qualifying business up to AED 375,000 taxable income |
| Tax Rate | 0% tax on all income if eligible | 0% tax on taxable income up to AED 375,000 |
| Applicability | Mainland and Free Zone (subject to conditions) | Mainland businesses and Qualifying Free Zone Persons |
| Limitations | Cannot deduct any expenses or carry forward losses; only for resident companies not part of an MNE | Subject to conditions and ongoing compliance |
| Duration | 2024–2026 tax years | Applies indefinitely as long as conditions are met |
| Measurement | Revenue | Taxable Income |
| Free Zone Considerations | Not restricted but subject to the revenue threshold | Qualifying Free Zone Persons only; must meet conditions |
| Administrative Requirements | Election, record-keeping | Compliance, documentation, transfer pricing |
In short, SBR helps smaller businesses stay tax-free as long as they keep revenue under AED 3 million. At the same time, the 0% threshold benefits any company, mainland or free zone, that keeps taxable profits under AED 375,000.
Choosing the right relief depends on how your income is measured, where you operate, and how your business is structured. That’s why many companies work with UAE corporate tax experts for tailored UAE corporate tax consultation. With ongoing UAE corporate tax compliance and UAE corporate tax services, ADEPTS ensures you don’t just qualify — you stay qualified.
Step-by-Step Guide to Determine Which Relief Applies
Not every business fits neatly into one tax category. Some qualify for Small Business Relief (SBR), others for the 0% corporate tax threshold, and a few for neither. The trick is knowing which one applies to you — before you file. This quick guide will help you figure that out, step by step.
1. Assess Your Annual Revenue
Start by checking your total business revenue for the year. If it’s AED 3 million or less, you could qualify for Small Business Relief (SBR). This relief is based on revenue, not profit. That means even if your expenses are high, what really matters is how much money your business earned before deductions. Many small companies confirm this through professional UAE corporate tax consultation to ensure their revenue is correctly calculated under FTA rules.
2. Calculate Your Taxable Income
Next, figure out your taxable income your net profit after subtracting legitimate business expenses. If that amount is AED 375,000 or less, you may qualify for the 0% corporate tax threshold. This applies to both mainland and free zone entities, provided they meet other compliance rules. Getting early advice from UAE corporate tax experts helps ensure you don’t misclassify your income and miss out on a legal tax advantage.
3. Evaluate Your Business Location
Your location matters more than you might think.
- Mainland companies can use both SBR and the 0% threshold (depending on revenue or profits).
- Free zone companies, on the other hand, must meet strict conditions to be a Qualifying Free Zone Person (QFZP) before claiming the 0% rate.
Many firms rely on UAE corporate tax consultants to check these conditions and align their business setup accordingly.
4. Compare Both Criteria Side-by-Side
Once you know your revenue and taxable income, compare them.
- If your revenue ≤ AED 3M, SBR may be the better option.
- If your taxable income ≤ AED 375K, the 0% threshold might suit you more.
A small consulting firm, for instance, could qualify for both, but only one may give a better long-term advantage. UAE corporate tax services can run both scenarios and recommend the smarter pick for your growth plan.
5. Think About Growth and Future Compliance
These reliefs sound easy, but they’re temporary or conditional. As your business grows, your eligibility can vanish overnight. That’s why you should plan beyond the current tax year. ADEPTS helps clients project future income, adjust accounting structures, and maintain smooth UAE corporate tax compliance even after crossing relief limits.
6. Seek Expert Support Before You File
Finally, don’t guess, get guidance. A short call with corporate tax specialists at ADEPTS can save you hours of confusion and potential penalties. Their tailored UAE corporate tax consultation walks you through registration, election filing, and record-keeping so you stay eligible and compliant from day one.
Key Points to Remember
Understanding the rules is one thing. Staying eligible is another. Both Small Business Relief (SBR) and the 0% Corporate Tax Threshold come with strict conditions and missing just one can land you in the standard 9% corporate tax bracket.
1. Eligibility Means Following the Rules — Closely
You only qualify if your business meets the official revenue and income thresholds. Go even a little over, and the relief is gone for that tax year. That’s why companies work with UAE corporate tax experts to keep their financial reporting clean and consistent.
2. Compliance is Non-Negotiable
Failing to meet Economic Substance, transfer pricing, or audit documentation requirements means losing your relief even if your numbers qualify. UAE corporate tax compliance services ensure your filings match the Federal Tax Authority (FTA) standards so you don’t get caught off-guard during a review.
3. Keep an Eye on FTA Bulletins and Deadlines
The FTA regularly issues corporate tax updates and reminders about filing and election deadlines. Missing one could result in penalties or loss of eligibility. ADEPTS monitors these updates for clients through continuous UAE corporate tax consultation, helping them stay aligned with changing rules.
4. Watch Out for GAAR and Anti-Avoidance Rules
The General Anti-Avoidance Rule (GAAR) allows the FTA to disregard artificial arrangements made to reduce tax. It could be challenged if you restructure your business purely to fit under SBR or the 0% threshold. This is where professional UAE corporate tax consultants can advise on safe, compliant planning.
5. Know Your Timelines and Election Deadlines
SBR isn’t forever, it runs until the 2026 tax year. The 0% corporate tax threshold, on the other hand, applies indefinitely as long as you meet the criteria. Make sure you file your SBR election and supporting records on time each year to keep your relief valid.
6. Communicate Clearly with Banks, Investors, and Auditors
Your tax status affects your financial credibility. Banks may review SBR or QFZP status before approving credit, and auditors check compliance documentation. Staying transparent with professional UAE corporate tax services shows that your company manages finances responsibly and understands its obligations.
7. Avoid the Most Common Mistakes
Many businesses lose eligibility due to simple errors like misclassifying revenue, ignoring substance requirements, or skipping transfer pricing documentation. These issues are fixable if caught early. Getting timely assisstance can prevent expensive surprises later.
Smart compliance isn’t just about avoiding penalties but building trust. With ADEPTS and their team of UAE corporate tax experts, businesses can meet every filing, reporting, and record-keeping standard without the stress.
How ADEPTS Supports UAE Businesses in Tax Relief Qualification
Understanding the UAE Corporate Tax relief can feel like walking through a maze. There are numbers, thresholds, and a list of rules that keep changing. That’s why many small businesses and free zone companies turn to ADEPTS for clear direction.
The team at ADEPTS looks closely at how each business earns, spends, and grows. They check if the Small Business Relief (SBR) or the regular UAE Corporate Tax regime will bring better results. It’s not just about paying less tax today, it’s about planning smart for the next few years.
For free zone companies, staying at a 0% tax rate isn’t automatic. You must prove you’re a Qualifying Free Zone Person (QFZP), follow the de-minimis rule, and keep your records in order. ADEPTS helps make sure all that happens on time. They guide clients through documentation, substance checks, and transfer pricing reports, which often trip up businesses during audits.
ADEPTS also helps small and growing firms build a plan that fits them. Their UAE corporate tax experts review revenue and compliance needs, help with elections under Ministerial Decision No. 73 of 2023, and ensure businesses don’t miss out on relief by mistake.
Most of all, ADEPTS teaches clients what not to do — like misreporting income or skipping filings. Hands-on UAE corporate tax consultation and year-round support make it easier for businesses to stay compliant and confident under the UAE’s new tax rules.
Conclusion
Strategic planning is the foundation of success under the UAE Corporate Tax regime. Whether your business qualifies for Small Business Relief (SBR) or the 0% corporate tax threshold, the key lies in understanding your numbers, maintaining compliance, and planning for growth.
Reliefs are not just about saving tax they’re about building a compliant, sustainable, and investor-ready business. With every financial year, the FTA refines its approach, making it even more crucial to stay proactive and informed.
That’s where ADEPTS comes in. As a trusted UAE corporate tax advisor, ADEPTS helps businesses assess eligibility, file elections on time, and maintain clear, audit-ready records. From understanding tax thresholds to navigating FTA guidelines, ADEPTS ensures you make every decision confidently and clearly.
With the proper guidance, tax relief isn’t a one-time advantage it becomes a long-term strategy for stability and growth.
FAQs:
Yes, SBR is applied at the individual entity level, not based on the combined revenue of a group. Each eligible entity with revenue ≤ AED 3 million can claim SBR independently. However, if a tax group has been formed for Corporate Tax purposes, then the SBR eligibility is assessed at the group level.
While under SBR, businesses can’t use or accumulate losses for future deductions. Once they leave the relief, only new losses (from that point onward) can be carried forward for UAE corporate tax compliance purposes.
A Qualifying Free Zone Person (QFZP) must separate qualifying and non-qualifying income clearly. This helps apply the de-minimis rule correctly and ensures the 0% rate is applied only to eligible activities.
Foreign branches are generally excluded from SBR, but they may benefit from the 0% corporate tax threshold on income earned in the UAE — if that income meets local eligibility tests.
Yes. Once a business crosses the AED 3 million revenue limit, SBR is forfeited for that full tax year. The entity then becomes subject to the standard 9% UAE Corporate Tax from that same period.
The Federal Tax Authority (FTA) expects evidence such as lease agreements, employee contracts, management records, and local expense details to prove genuine business activity in the UAE.
Generally, grants and capital funding aren’t considered revenue for SBR purposes. But businesses should maintain documentation and consult UAE corporate tax consultants to confirm proper classification.
If the SBR election is based on wrong calculations, the FTA can withdraw the relief and impose back taxes with penalties. Quick disclosure and correction may reduce fines, but expert UAE corporate tax help is strongly advised.
Improper related-party pricing or missing transfer pricing documentation can disqualify a QFZP from the 0% rate. Regular review and UAE corporate tax consultation ensure ongoing compliance.
Banks and investors often prefer the 0% QFZP route because it signals structured operations and long-term compliance. SBR is seen as temporary and suited for early-stage businesses.
No. Once a business elects SBR, it must keep that status for the entire tax year. The switch to the standard 9% corporate tax applies only in the following year.
Keep income statements, contracts, invoices, and FTA submissions ready. UAE corporate tax experts recommend digital records and reconciliation reports to make audits smooth and transparent.
Yes, but only if each subsidiary meets its own criteria independently. Group status doesn’t automatically extend SBR or 0% qualification to every entity under the parent company.
References
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https://tax.gov.ae//en/media.centre/news/federal.tax.authority.issues.corporate.tax.guide.on.free.zone.persons.aspx. - BASIC TAX INFORMATION BULLETIN.
https://tax.gov.ae/Datafolder/Files/Pdf/2024/CT%20Bulletin/Basic%20Tax%20Information%20bulletin-%20Free%20Zone%20Person-English.pdf. - Corporate Tax (CT).
https://u.ae/en/information-and-services/finance-and-investment/taxation/corporate-tax. - Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
https://mof.gov.ae/wp-content/uploads/2022/12/Federal-Decree-Law-No.-47-of-2022-EN.pdf. - Federal Tax Authority – Corporate Tax Topics.
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https://uaelegislation.gov.ae/en/legislations/2175/download. - Ministerial Decision No. 73 of 2023 on Small Business Relief for the Purposes of Federal DecreeLaw No. 47 of 2022 on the Taxation of Corporations and Businesses.
https://mof.gov.ae/wp-content/uploads/2023/04/Ministerial-Decision-No.-73-of-2023-on-Small-Business-Relief-for-the-Purposes-of-Federal-Decree-Law-No.-47-of-2022.pdf. - Ministerial Decision No. 73 of 2023 on Small Business Relief for the Purposes of Federal DecreeLaw No. 47 of 2022 on the Taxation of Corporations and Businesses.
https://mof.gov.ae/wp-content/uploads/2023/04/Ministerial-Decision-No.-73-of-2023-on-Small-Business-Relief-for-the-Purposes-of-Federal-Decree-Law-No.-47-of-2022.pdf. - News, Sunil Singh, Special to Gulf. ‘De Minimis Requirements: What UAE Free Zone Companies Should Know’. Gulf News: Latest UAE News, Dubai News, Business, Travel News, Dubai Gold Rate, Prayer Time, Cinema, 7 May 2025,
https://gulfnews.com/business/corporate-tax/de-minimis-requirements-what-uae-free-zone-companies-should-know-1.500117737. - The Economic Substance Regulations.
https://u.ae/en/information-and-services/finance-and-investment/taxation/the-economic-substance-regulations.
