The UAE introduces corporate tax to support a strong economy. The system also protects small firms with targeted relief. This guide explains the reliefs in plain words. Your team reads each rule with care. Your team applies each step with records. Your leadership plans with numbers and dates.
The rules start for tax periods that begin on or after 1 June 2023. A company checks its first tax period. A company aligns its year with FTA clarifications for non-standard periods. A company registers on time. A company files within nine months after year-end. The process looks simple when you follow a checklist. The process stays fair when you keep evidence.
Corporate Tax Relief: Meaning and Purpose
Corporate tax relief reduces a legal tax burden. The relief encourages investment. The relief supports growth. The relief helps young firms during early years. The relief guides mature firms during change. The relief often targets sectors with strategic value.
The UAE uses several tools. The law gives exemptions on defined income. The law allows deductions for ordinary costs. The law offers credits that reduce a payable amount. Each tool follows clear eligibility. Each tool demands good records.
Overview of Relief Instruments
A business studies three broad forms:
- Exemptions: The law removes certain income from the tax base.
- Deductions: The law allows allowable costs against income.
- Credits: The law reduces the final tax payable under set programs.
Your finance team maps each activity to a relief. Your controller keeps evidence with dates and contracts. Your auditor tests the tie between ledgers and claims.
Why Relief Matters in the UAE
Relief protects cash during hard cycles. Relief improves return on new projects. Relief supports innovation with patient runway. Relief attracts foreign capital to diverse sectors. Relief strengthens long-term stability for employers. Relief helps the country move from oil to knowledge. Your business gains room to invest in people and tools. Your community gains jobs and skills.
Key Categories in UAE Corporate Tax Relief
1) Small Business Relief (SBR)
Small Business Relief supports resident persons who meet a revenue ceiling. A qualifying entity elects SBR for a period. The election treats taxable income as zero for that period. The entity enjoys simplified compliance. The entity still respects the arm’s length principle for related parties. The entity keeps basic support like invoices and contracts.
Eligibility signals:
- The person is resident in the UAE.
- The revenue for the current and all prior tax periods (up to the cut-off date) is at or below the stated limit (AED 3,000,000).
- The entity isn’t a Qualifying Free Zone Person for that period.
- The entity isn’t a member of a large multinational group that crosses a global revenue threshold.
2) Free Zone Relief
Free Zones remain vital to trade and technology. A licensed Free Zone company may qualify for a 0% rate on qualifying income. The company pays 9% on non-qualifying income. The company must keep adequate presence in the UAE. The company must keep proper transfer-pricing documentation when thresholds trigger. The company must avoid an election into mainland taxation if it seeks the 0% benefit.
Qualifying signals may include:
- Listed activities within decisions and notices.
- Distribution from a designated zone with customs control.
- Certain cross-border services under defined scopes.
- De-minimis room for small non-qualifying amounts.
3) Group Relief (Intra-Group)
Group Relief lets related companies optimize tax within a group. A loss in one entity may offset profit in another under conditions. The group can move assets on a no-gain no-loss basis in specific cases. The rules define common ownership levels. The rules define continuity tests. Your legal team documents the chain. Your finance team books entries with care.
Benefits:
- Lower overall tax for the group.
- Faster cash-flow relief where one entity holds losses.
- Cleaner structures for future financing.
4) Restructuring Relief
Restructuring Relief supports turnarounds and simplifications. The law may defer tax when a qualifying business transfers assets or liabilities under set rules. The law may allow carry-forward of tax losses that meet continuity tests. A compliant plan reduces friction during mergers, splits, or internal transfers. Your timetable records each effective date. Your advisers align legal steps with tax steps.
How Relief Works with Rates and Thresholds
The UAE sets a low headline rate with a small-profits cushion. Profit up to AED 375,000 faces 0%. Profit above that level faces 9%. Reliefs interact with this ladder. SBR can set taxable income to zero for a period when elected. Free Zone relief can set qualifying income at 0% for a QFZP. Non-qualifying income still faces 9%. Large multinational groups plan ahead for minimum top-up rules from financial years starting on or after 1 January 2025.
Records and Evidence: Foundations of Relief
Relief depends on proof. Your company keeps:
- Audited financial statements with notes.
- Trial balance and general ledgers by period.
- Contracts, purchase orders, and invoices.
- Transfer-pricing master file and local file where relevant.
- ESR evidence for substance in the UAE.
- License copies and activity endorsements.
- Revenue mapping that tags qualifying and non-qualifying streams.
- Board minutes that show key decisions made in the UAE.
A tidy archive protects relief during review. A dated checklist speeds filing. A control owner signs each step.
Small Business Relief: Practical Steps
Your finance team checks revenue against the AED 3,000,000 ceiling. Your team confirms residency status. Your team confirms that the entity isn’t a Qualifying Free Zone Person for the period. Your team files the election as required. Your team notes that other reliefs may not stack when SBR is chosen. Your team still follows the arm’s length principle for related-party pricing, even if transfer-pricing documentation isn’t required.
Advantages:
- Simplified compliance for the period.
- No taxable income for that period by election.
- Focus on growth with cleaner cash flow.
Limits:
- Exclusions apply to QFZPs and to members of very large multinational groups.
- Other deductions or exemptions may not apply alongside the election.
Free Zone Relief: Conditions and Monitoring
A Free Zone entity studies the QFZP conditions:
- It’s a juridical person with a valid zone license.
- It maintains adequate presence: premises, staff, and costs inside the UAE.
- It earns qualifying income defined in decisions and notices.
- It follows transfer-pricing rules with files when required.
- It doesn’t elect into mainland taxation for that period.
A breach removes the status from the start of the period. The entity then faces 9% on taxable profit under the general rule. Your ERP should tag transactions by customer location, delivery point, and branch. Your contracts should define delivery terms and scope. Your reports should show a split between qualifying and non-qualifying streams.
Group Relief: Conditions and Examples
Group Relief needs common ownership that meets thresholds. The group sets a policy for loss transfers and asset movements. The group documents beneficial ownership and voting rights. The group tests continuity over time.
Use cases:
- Loss offset: Company A holds a loss. Company B holds a profit. The group uses relief to reduce B’s taxable base under rules.
- No-gain no-loss: The group moves an asset for reorganization. The relief defers gain within conditions. The base carries into the new holder.
Your legal and finance teams track every transfer with dates, valuations, and minutes.
Restructuring Relief: Turnaround Pathways
A business under stress may sell a line or move assets to a clean entity. Restructuring Relief can defer tax effects within the boundaries of the law. The company can also carry forward tax losses when continuity tests are met. The company then uses those losses against future profits, subject to limits. A clear plan with advisors helps you time steps around period-ends.
Compliance Calendar and Filing Window
A UAE entity files within nine months after the financial year-end. A 31 December year-end points to a 30 September filing deadline. Registration timelines vary by taxpayer type under FTA decisions. Natural persons with business turnover above AED 1,000,000 must register. Non-residents with a permanent establishment must register after nexus arises. Your calendar sets internal cut-offs for audit, computation, and sign-off.
Interaction with Economic Substance Regulations (ESR)
ESR demands real activity. Relief often hinges on that reality. A QFZP shows substance with staff, with premises, and with costs in the UAE. Board meetings take place in the country. Key decisions happen in the country. Payroll and leases support presence. ESR filings align with tax claims. Consistency builds credibility.
Transfer Pricing: Everyday Alignment
Related-party pricing must be arm’s length. Your team prepares policies that link prices to functions and risks. Your team creates benchmarks from independent sources. Your team updates intercompany agreements. Your invoices follow the agreements. Your files defend the margins during review. Even with SBR, arm’s length behavior still applies.
Governance and Internal Controls
Leadership sets a tax control framework. The framework defines roles and escalations. The framework lists key controls:
- Contract review for delivery points and customer location.
- ERP tags for qualifying and non-qualifying streams.
- Monthly revenue mapping and reconciliation.
- Transfer-pricing review before year-end.
- ESR evidence pack update each quarter.
- Filing checklist with sign-offs and backups.
Governance reduces surprises. Controls support relief claims.
Common Pitfalls and How to Avoid Them
- Late registration: Track entity events and set alerts.
- Wrong status in Free Zone: Re-test QFZP conditions each period.
- Weak documentation: Build files contemporaneously, not after notice.
- Poor revenue mapping: Tag transactions by customer, place of supply, and branch.
- SBR misuse: Check exclusions before you elect.
- Group relief errors: Prove ownership and continuity with documents.
A short internal audit saves a long external review. A clean archive saves fees and time.
Practical Checklist for Finance Teams
- Confirm tax period dates and registration status.
- Pick the right relief elections for the year.
- Reconcile accounting profit to taxable profit.
- Segment revenue into qualifying vs. non-qualifying.
- Prepare or refresh transfer-pricing files.
- Compile ESR evidence of people, premises, and costs.
- Approve computations with minutes.
- File on time and store the pack.
What Can Help — Mubarak Al Ketbi (MAK) Auditing
Mubarak Al Ketbi (MAK) Auditing guides your relief strategy with careful steps. Our team maps your revenue to the correct relief buckets. Our team prepares transfer-pricing files that match your facts. Our team aligns ESR evidence with your license and your operations. Our team builds your computation and files on time. We support group steps, restructuring moves, and Free Zone status reviews. With us, you plan with clarity and act with confidence, because every cloud has a silver lining.
For more information (as bullet points)
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Contact / WhatsApp: +971 50 276 2132
