Two numbers dominate every conversation about UAE corporate tax for small companies: AED 375,000 and AED 3 million. They get treated as versions of the same idea. They are not related at all, and confusing them leads to businesses either overpaying or getting an unpleasant surprise.
The short version
| AED 375,000 | AED 3 million | |
|---|---|---|
| What it measures | Taxable income (profit) | Revenue (turnover) |
| What it gives you | 0% on income below it | Zero taxable income entirely |
| Who gets it | Every UAE business | Only those who elect and qualify |
| How long it lasts | Permanent | Periods ending on or before 31 Dec 2026 |
The AED 375,000 allowance
This is the standard rate structure. Every UAE business pays 0% corporate tax on its first AED 375,000 of taxable income and 9% on everything above that. It applies automatically, it applies regardless of turnover, and there is nothing to elect.
A company with AED 40 million of revenue and AED 300,000 of taxable profit pays nothing, because the test is profit, not size. A company with AED 900,000 of revenue and AED 600,000 of profit pays 9% on AED 225,000.
Small Business Relief
This is a separate, temporary mechanism. If your revenue is AED 3 million or less — in the current period and every previous period since June 2023 — you can elect to be treated as having no taxable income whatsoever.
The difference only becomes visible when profits are healthy. A business with AED 2 million revenue and AED 800,000 profit:
- Under the standard rules: 0% on AED 375,000, 9% on AED 425,000 = AED 38,250
- With Small Business Relief elected: nil
That AED 38,250 gap is what expires when the relief closes for periods ending after 31 December 2026. The AED 375,000 allowance does not go anywhere — it just stops being hidden underneath something more generous.
Where the confusion causes real damage
"We are under AED 3 million so we do not need to register." Wrong on both counts. Registration is required regardless, and the relief is claimed inside the return you file. Skipping registration on the strength of a revenue figure creates a penalty exposure that has nothing to do with how much tax you owe.
"The AED 375,000 exemption is ending in 2026." It is not. It is part of the permanent rate structure. What ends is Small Business Relief.
"We are a free zone company so both apply to us." A Qualifying Free Zone Person taking the 0% rate on qualifying income cannot elect Small Business Relief. You choose a lane.
"Our revenue dropped below AED 3 million this year, so we qualify again." The test looks at the current period and every previous period since June 2023. Cross AED 3 million once and you are out permanently, not just for that year.
Working out which applies to you
For the final eligible period, the sequence is: check whether you qualify for the relief at all, then decide whether electing it is actually in your interest — remembering that electing forfeits that period tax losses.
The Small Business Relief Checker covers the eligibility conditions including the exclusions. For the arithmetic under standard rules, the Corporate Tax Calculator shows what the 0% band and the 9% rate produce on your numbers, and the Profit Margin Calculator is useful if you are trying to work out what your taxable income will look like before year-end rather than after.
The planning point
Businesses that have been relying on Small Business Relief have never had a reason to care about their taxable income figure — it was zero by election. From 2027, taxable income becomes the number that determines the bill, which means expense documentation, depreciation treatment and timing decisions all start to matter in a way they have not for three years.
That shift is more significant than the tax itself. The AED 375,000 allowance means many genuinely small businesses will still pay little or nothing. But they will have to calculate it properly to find that out.
General information only, not tax advice. Confirm your position with the Federal Tax Authority or a qualified adviser.