How Outsourcing Your Accounting to Young and Right Can Significantly Reduce Your Business Costs in Dubai
15/12/2025
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The UAE's economy thrives on the innovation and growth of small and medium-sized enterprises (SMEs). These businesses contribute significantly to the nation’s economic development, job creation, and diversification of its economic activities. Recognizing the role of SMEs, the UAE government introduced the Small Business Relief (SBR) program to support their growth. This program offers an SME tax exemption, which allows qualifying small businesses to pay 0% corporate tax for a specific period.
The introduction of SME Tax Exemption (SBR) is a strategic move to make the UAE a more attractive environment for small businesses. However, many business owners are still unaware of the full details of the program, its eligibility criteria, and the implications of opting for or against it. This blog explores everything you need to know about the SME tax exemption, including how to qualify, key benefits, and the decision-making process for opting into the program.
The SME Tax Exemption is part of the UAE’s broader corporate tax law aimed at encouraging and supporting small businesses. Small and medium-sized businesses often face significant financial constraints, and the SBR program was introduced to ease these pressures by offering a corporate tax exemption.
Corporate Tax Relief: Eligible businesses can apply for the SBR program, which offers 0% corporate tax during the specified tax period. The relief is available to businesses that meet the eligibility criteria, providing them with a significant tax advantage.
Purpose: The UAE government introduced the SBR to foster growth in SMEs, create job opportunities, and enable smaller businesses to compete with larger, more established companies. By exempting eligible businesses from corporate tax, the UAE is providing vital support to boost the local economy.
To better understand how the SME tax exemption works, let’s break down the key entities and attributes associated with this program.
Small Business Relief (SBR) is the central element of the UAE’s corporate tax exemption initiative. It is designed to assist small businesses by allowing them to opt out of paying corporate tax under specific conditions.
Eligibility: The program is available to businesses that meet the revenue threshold for the relevant tax period (2024 to 2026).
Key Benefit: The primary benefit of the program is the 0% corporate tax on eligible businesses, allowing them to retain more capital for business expansion, investment, or reinvestment.
The Federal Tax Authority (FTA) is the governing body responsible for administering and overseeing all tax-related activities in the UAE. The FTA is directly involved in enforcing the SBR program.
Role: The FTA defines the rules, eligibility criteria, and process for small businesses to apply for the SBR program.
Enforcement: The FTA ensures that businesses comply with the corporate tax laws and guidelines set forth by the government.
The UAE Corporate Tax Law serves as the foundation for the SBR program and all other tax regulations in the country. The law specifies the eligibility criteria for businesses to benefit from tax exemptions and deductions.
Impact on SMEs: Businesses that qualify under the SBR program can benefit from a 0% tax rate on their taxable income for specific tax periods.
This ministerial decision outlines the details and eligibility criteria for the Small Business Relief program.
Significance: Ministerial Decision No. 73 of 2023 formally enacts the SBR program and explains the technicalities of the scheme, including the requirements for businesses to qualify for the exemption.
Free zones in the UAE play a critical role in facilitating the growth of SMEs, offering several tax advantages, including eligibility for the SME Tax Exemption (SBR). However, businesses operating in free zones must meet certain criteria to qualify for the SBR program. Key points include:
Revenue Threshold: Free zone companies must have annual revenue below AED 3,000,000 to qualify for the SBR.
QFZP Exclusion: Free zone companies that are classified as Qualifying Free Zone Persons (QFZPs) are not eligible for the SBR.
Simplified Compliance: Free zones offer simplified tax filings, making it easier for businesses to comply with SME Tax Exemption regulations.
Understanding the eligibility criteria for the SME tax exemption (SBR) is crucial for businesses that want to apply for the relief. Let’s explore the key attributes and conditions businesses must meet to qualify for the SBR program.
The most important eligibility factor is the business's annual revenue. To qualify for the SBR program, a business must have annual revenue less than AED 3,000,000 in the relevant tax period (2024–2026).
Key Point: If a business exceeds the revenue threshold of AED 3,000,000, it automatically becomes ineligible for the SBR program.
Eligible businesses that opt for the SBR program will be exempt from paying corporate tax. This exemption means that businesses will effectively pay 0% corporate tax on their taxable income for the applicable tax period.
Financial Relief: For small businesses, this relief is incredibly beneficial, as it reduces financial burdens and allows businesses to reinvest more of their profits into growth, new projects, or scaling operations.
One condition of opting into the SBR program is that businesses cannot deduct net interest expenses during the tax period. This limitation on interest expense deductions could affect businesses that rely heavily on debt financing.
Strategic Decision: Businesses that have significant interest expenses should consider whether opting into the SBR scheme is the best option. While it provides a tax exemption, the inability to deduct interest expenses could be a downside for some.
Opt-in: If a business opts in for the SBR program, it will enjoy 0% corporate tax for the relevant tax period. However, it will not be able to claim any interest expense deductions or carry forward unused interest expenses to future years.
Opt-out: If a business opts out, it will not receive the SBR tax exemption but can still claim interest expense deductions and carry forward any unused interest expenses for up to 10 years.
Free zone companies in the UAE can also qualify for the SBR program as long as they meet the revenue threshold and other eligibility conditions. However, there’s an important caveat:
Exclusion of QFZPs: If a free zone company is classified as a Qualifying Free Zone Person (QFZP), it is not eligible for the SBR program. QFZPs already benefit from a 0% corporate tax rate on their qualifying income, so they are excluded from the SBR tax exemption.
Exceeding the Revenue Threshold: Any business with annual revenue exceeding AED 3,000,000 is automatically disqualified from the SBR program.
Qualifying Free Zone Persons (QFZPs): Free zone businesses that are classified as QFZPs are not eligible for the relief, as they are already receiving favorable tax treatment under the free zone provisions.
The SBR program offers several significant benefits for SMEs in the UAE. Let’s take a closer look at how businesses can leverage this relief to their advantage.
The 0% corporate tax benefit allows small businesses to save a substantial amount on tax payments. These savings can be reinvested into the business for growth, expansion, hiring more employees, and improving operations.
Increased Capital for Growth: With lower tax liabilities, businesses have more capital to allocate towards innovation, new product development, and scaling operations, enabling them to expand their market share.
Businesses that opt for the SBR program can use cash basis accounting for tax filings, which simplifies the process. Cash basis accounting means businesses only recognize income when it is received and expenses when they are paid, making the tax filing process less complex.
Less Administrative Work: This simplified approach to accounting can reduce the administrative burden, allowing businesses to focus more on their core activities rather than managing complex tax filings.
The tax exemption granted under the SBR program provides a competitive advantage for SMEs. With fewer financial constraints, small businesses can lower their operating costs, invest in marketing, or lower their product/service prices to capture more market share.
Attracting Investment: SMEs that can retain more of their profits are more likely to attract investment, as they can reinvest their profits back into the business, enhancing growth prospects.
The SME Tax Exemption (SBR) program is a significant initiative for small businesses in the UAE, but what does the future hold for this tax relief and corporate tax laws? As the UAE continues to strengthen its position as a global business hub, changes in tax laws are expected. Here’s what businesses can anticipate:
Possible Extension: The SBR program may be extended beyond 2026, depending on its success and economic impact.
Corporate Tax Adjustments: Future reforms may introduce new incentives or adjustments to corporate tax rates, especially for SMEs.
More Inclusive Relief: There could be efforts to expand eligibility, allowing more businesses to benefit from tax exemptions.
Adoption of Digital Tax Systems: With the rise of digital businesses, the UAE may implement more streamlined, tech-driven tax filing and compliance processes.
At Young & Right, we specialize in assisting small and medium-sized enterprises (SMEs) in navigating the complexities of the SME Tax Exemption (SBR) program in the UAE. Our expert consultants provide tailored support to ensure your business qualifies and maximizes the benefits of this relief.
We help determine if your business meets the SBR criteria, including the AED 3,000,000 revenue threshold. Our team offers strategic advice on whether opting in or out of the SBR program is best for your financial situation.
For free zone businesses, we guide you through the eligibility process, ensuring compliance with both SBR and Qualifying Free Zone Person (QFZP) criteria.
If your business qualifies, we assist in filing simplified cash basis accounting tax returns, ensuring full compliance with UAE tax laws.
From tax filings to long-term strategy, Young & Right offers continuous support to help your business thrive. We ensure you make the most of the SME Tax Exemption to boost growth and competitiveness.
The SME Tax Exemption (SBR) is a powerful tool for small businesses in the UAE, offering them the opportunity to significantly reduce their tax liabilities and reinvest savings into business growth. By understanding the eligibility criteria, key benefits, and potential challenges, business owners can make informed decisions about whether to opt into the program.
For personalized advice and assistance on SME tax exemptions and other tax-related matters, feel free to reach out to Young & Right, your trusted tax consultancy service in the UAE.
Discover how Young & Right can help your business qualify for tax relief and grow faster. Contact us for expert tax consultancy today!
