The UAE Ministry of Finance has announced an extension to Small Business Relief (SBR), providing further certainty for small businesses and start-ups operating across the UAE.
Under the latest decision, eligible businesses will now be able to claim Small Business Relief for Tax Periods ending on or before 31 December 2029, extending the relief by three years from its previous end date of 31 December 2026. The existing annual revenue threshold of AED 3 million remains unchanged.
For smaller businesses, this provides continued access to an important Corporate Tax relief. However, with the UAE’s Research and Development (R&D) Tax Credit now also in effect, innovative businesses should consider how the two incentives interact.
What is Small Business Relief?
Small Business Relief is designed to reduce the Corporate Tax and compliance burden for eligible businesses with Revenue of AED 3 million or less.
Where the relevant conditions are met and the business elects for SBR, it is treated as having no Taxable Income for the relevant Tax Period.
The extension therefore provides additional support for small businesses and start-ups while they establish and grow their operations in the UAE.
The Interaction with the UAE R&D Tax Credit
The UAE’s R&D Tax Credit applies for tax periods commencing on or after 1 January 2026 and represents a significant new incentive for businesses investing in innovation.
Under Phase 1 of the programme, eligible businesses can benefit from a non-refundable tax credit of up to 50% of qualifying R&D expenditure, with qualifying expenditure considered up to AED 5 million per tax period.
Importantly, businesses that elect for Small Business Relief are not eligible to claim the R&D Tax Credit for that tax period.
For innovative businesses that fall within the AED 3 million SBR threshold, this creates an important consideration. Rather than automatically electing for Small Business Relief, businesses undertaking significant R&D may need to assess which incentive provides the greater value.
Which Businesses Could This Affect?
The interaction is particularly relevant for growing businesses investing heavily in the development of new or improved products, technologies and processes.
This could include businesses undertaking activities such as:
- developing new software platforms or technological solutions
- designing or improving manufacturing processes
- developing new products or materials
- carrying out engineering development and testing
- overcoming technical challenges through structured experimentation.
Where these activities meet the UAE R&D criteria, the expenditure incurred may potentially qualify for the R&D Tax Credit.
The UAE regime requires qualifying R&D activities to demonstrate characteristics including novelty, creativity, uncertainty, a systematic approach and the ability for results to be transferable or reproducible.
Planning Ahead as Businesses Grow
For many smaller businesses, Small Business Relief will continue to provide a valuable and straightforward Corporate Tax benefit.
However, businesses investing substantially in R&D should consider their position more carefully.
As companies grow, their investment in technology, people and product development can increase considerably. Understanding the potential value of the R&D Tax Credit early can therefore help businesses make more informed decisions around their Corporate Tax position and prepare appropriately for future claims.
Early preparation is also particularly important under the UAE R&D regime, with projects requiring pre-approval and businesses needing appropriate technical and financial evidence to support qualifying R&D activities and expenditure.
What Could Change in the Future?
The UAE R&D Tax Incentives Programme is still developing.
When Phase 1 was launched in March 2026, the Ministry of Finance confirmed that Phase 2 would consider potential enhancements to the regime. These include the possibility of introducing a refundable R&D Tax Credit and/or expanding the level of qualifying expenditure eligible for relief.
A refundable credit could significantly increase the relevance of the incentive for early-stage and loss-making R&D businesses that may currently have limited Corporate Tax liabilities.
Further details on Phase 2 are expected in due course.
How CBTax Can Help
As the UAE Corporate Tax and R&D Tax Incentive landscape continues to develop, understanding how the available reliefs interact will become increasingly important for innovative businesses.
At CBTax, we work with businesses to identify qualifying R&D activities, assess the potential value of the R&D Tax Credit and support the technical, financial and pre-approval requirements needed to prepare robust claims.
If your business is investing in innovation and you would like to understand how Small Business Relief or the UAE R&D Tax Credit could apply to you, contact our specialist team today.