Short answer

Companies with up to AED 3m revenue may elect 0 % corporate tax, but only for tax periods ending on or before 31 Dec 2026 and only if the election is made actively. After that the regular 9 % above AED 375,000 applies. As of 09/2026.

The rule many take to be permanent

Small Business Relief: revenue ≤ AED 3m, election to 0 %, tax periods ending on or before 31 Dec 2026, must be elected (as of 09/2026, UAE FTA, Art. 21 CT Law)

Small Business Relief is a transitional rule, not a permanent solution. Companies with revenue up to AED 3m may elect 0 % corporate tax — but only for tax periods ending on or before 31 December 2026.

Anyone whose calculation rests on it should use 2026 to redo the maths. After that the regular rate applies.

Three things regularly overlooked

The election must be made. It does not apply automatically. Fail to elect it in the return and you pay the regular rate — even with revenue far below the threshold. That is the most irritating mistake, because it is pure formality.

Revenue counts, not profit. A company with AED 2.8m revenue and a thin margin falls within it; one with AED 3.2m revenue and a fat margin does not.

Registration remains mandatory. Even at 0 % you must be registered for corporate tax and file on time. Failures attract penalties regardless of whether tax is due.

What applies afterwards

9 % Corporate tax on taxable profit above AED 375,000; 0 % below (as of 09/2026, Federal Decree-Law No. 47 of 2022)

From tax periods after 31 Dec 2026 there are two routes to 0 %, and both come with conditions:

| Route | Condition | |---|---| | Threshold | The first AED 375,000 of taxable profit remain at 0 % anyway | | QFZP status | Only in a free zone, with adequate substance, qualifying income and compliance with the de-minimis threshold |

The threshold applies to everyone. QFZP status is tied to a free zone and tested annually — it is not a replacement for the expiring relief but a different construction with its own requirements.

The two routes are mutually exclusive

Electing Small Business Relief for a period means you are not a Qualifying Free Zone Person for that period. It is a decision per tax period, not a combination.

What to do now

  1. Check whether the relief was actually elected for the current period. A glance at the return is enough.
  2. Run the 2027 numbers — at the regular rate, not with the relief.
  3. For a free zone company, check the QFZP conditions: substance, revenue mix, audited accounts. If substance is missing, now is the time to build it — not in December 2027.
  4. For a mainland company the regular rate is the basis. That is not bad news: at AED 1m of taxable profit the effective burden is 5.6 %, because the first AED 375,000 stay free.

What we recommend

Treat 2026 as a transitional year, not a normal one. Anyone who notices the expiry in 2027 has no time left to build substance or adjust the structure.

Whether your structure still fits after the expiry is what the first consultation is for — with licensed partners brought in for the tax assessment.

Exit Palm does not provide legal or tax advice. For legal and tax questions we work with licensed partners in Germany and the UAE. All information without warranty, as of the date shown.