UAE Corporate Tax 2026 for SMEs: Small Business Relief Guide for Travel and Tourism Firms

UAE Corporate Tax 2026 for SMEs

Small Business Relief Guide for Travel and Tourism Firms

A technical advisory guide for UAE-resident travel and tourism businesses

As the UAE Corporate Tax regime moves into 2026, most small and medium-sized enterprises in travel and tourism will be operating in what is, for them, the third year of the corporate tax framework. For many SMEs, 2026 is not about learning the rules, but about making final structural and planning decisions while relief is still available.

The most important of these reliefs is Small Business Relief (SBR). Under current legislation, SBR applies to tax periods ending on or before 31 December 2026 and allows eligible UAE-resident taxable persons to be treated as having no corporate tax payable for the period, provided specific conditions are met.

For travel agents, tour operators, DMCs, small hotels, and tourism service providers, SBR offers a narrow but valuable window. Used correctly, it allows businesses to preserve cash, stabilise balance sheets, and prepare for full corporate taxation. Used incorrectly, it creates audit exposure and false comfort.

This guide explains how SBR actually works in practice, how it interacts with free zone structures, VAT, and transfer pricing, and what travel and tourism SMEs should be doing in 2026 to avoid surprises.

1. The legal foundation of Small Business Relief

Small Business Relief is grounded in:

• Article 21 of Federal Decree-Law No. 47 of 2022 (Corporate Tax Law)

• Cabinet Decision No. 49 of 2023, which sets out the operational rules

Under the current law, SBR is available only for tax periods ending on or before 31 December 2026. There is no automatic extension beyond this date. Any continuation would require a new Cabinet Decision.

Importantly, SBR is not an exemption from corporate tax. It is a relief mechanism that treats an eligible person as having no taxable income for the relevant period, even though the person remains fully within the corporate tax system.

2. What Small Business Relief actually does

2.1 Relief applies to taxable income, not revenue

One of the most common technical misunderstandings is the idea that SBR provides “zero tax on revenue up to AED 3 million”. This is incorrect.

The AED 3 million threshold is an eligibility test, not a tax base. If a business qualifies and elects SBR:

• All taxable income for that period is treated as nil

• No corporate tax is payable for that tax period

If the threshold is breached, the entire period falls outside SBR and normal corporate tax rules apply.

2.2 The revenue threshold

To qualify for SBR:

• Revenue for the tax period must not exceed AED 3 million

• Revenue is determined using accounting standards, not cash receipts

• VAT is excluded from revenue

Revenue includes commissions, mark-ups, service fees, and operating income. It does not automatically include:

• Pure disbursements

• Client funds held in a true agency capacity

For travel businesses, this distinction is critical. Misclassifying pass-through client money as revenue can unintentionally disqualify an otherwise eligible entity.

2.3 Election is mandatory and annual

SBR is not automatic. An eligible entity must elect to apply the relief in its corporate tax return for the period.

The election:

• Is made per tax period

• Is irrevocable once submitted

• Must be filed within the standard corporate tax filing deadline (generally nine months after year-end)

Failing to elect means the entity is taxed under normal rules, even if it meets all eligibility criteria.

3. Who cannot use Small Business Relief

SBR is deliberately restricted. It cannot be used by:

• Entities that are members of a tax group

• Entities with a permanent establishment outside the UAE

• Qualifying Free Zone Persons (QFZPs)

This last point is especially important for travel and tourism businesses.

4. Free zones, qualifying income, and SBR: no overlap

A business cannot be both a Qualifying Free Zone Person and an SBR claimant for the same tax period.

If a free zone entity elects SBR:

• It is treated as a normal taxable person for that period

• It cannot apply the 0% free zone corporate tax regime

• All income is considered under the standard corporate tax framework (subject to SBR relief)

This is a strategic decision, not a technical accident.

For some small free zone travel businesses, SBR may be attractive in early years. For others, particularly those with scalable international income streams, maintaining QFZP status may be more valuable. The two regimes are mutually exclusive for a given tax period.

5. Practical SBR risks in travel and tourism

5.1 Seasonal revenue spikes

Travel businesses are often seasonal. A strong Q4 driven by inbound tourism, group travel, or peak holiday demand can push revenue over AED 3 million, even if the rest of the year is modest.

There is no averaging and no pro-rating. Eligibility is assessed on actual revenue for the full tax period.

This means that a single strong season can disqualify the entire year and Forecasting matters more than historic performance

5.2 FX gains and accounting classification

Foreign exchange gains are not revenue under accounting standards. They are other income.

However, poor chart-of-accounts design often causes FX movements to be booked through revenue lines. For SBR purposes, this can artificially inflate reported revenue and trigger ineligibility.

Travel SMEs with multi-currency flows should review:

• Revenue classification

• FX gain/loss presentation

• Consistency between GL, management reports, and CT filings

5.3 Reimbursements and agency models

Air tickets, hotel bookings, and third-party services frequently pass through travel agents’ books.

If the agent acts as principal, amounts form part of revenue.
If the agent acts as agent, only the commission or margin is revenue.

This is not a tax choice. It is a contractual and accounting determination, and it directly affects SBR eligibility.

6. What changes in 2026: enforcement, not new relief

There are no new SBR benefits introduced in 2026. Instead, 2026 marks a shift in emphasis:

• Increased audit activity by the Federal Tax Authority

• Greater focus on revenue thresholds and eligibility evidence

• Less tolerance for informal or inconsistent accounting

SBR remains available under the same statutory limits, but the expectation is that businesses using it can prove eligibility cleanly and consistently.

7. Penalties, filings, and record-keeping

SBR does not reduce compliance obligations.

Businesses applying SBR must still:

• Register for corporate tax

• File corporate tax returns

• Maintain proper accounting records

• Retain records for at least seven years

Penalties for late filing, failure to file, or incorrect filings apply regardless of whether tax is ultimately payable.

For SMEs that have treated SBR as “no tax, no risk”, 2026 is where that assumption starts to fail.

8. Interaction with VAT and broader compliance

Corporate tax does not exist in isolation.

For travel and tourism businesses:

• VAT registration, filings, and reconciliations must align with CT revenue figures

• Principal vs agent determinations must be consistent across VAT and CT

• Transfer pricing rules apply to related-party transactions, even for SMEs

Economic Substance Regulations are no longer in force, but substance and control still matter under corporate tax and anti-avoidance principles.

Inconsistent treatment across VAT, CT, and accounting is one of the fastest ways to trigger audit questions.

9. Planning for the end of Small Business Relief

Under current law, SBR ends with tax periods concluding on or before 31 December 2026.

That makes 2026 the year to:

• Model post-SBR effective tax rates

• Review legal entity structures

• Assess free zone vs mainland positioning

• Revisit pricing and margin assumptions

For low-margin travel businesses, a 9% tax on taxable income can materially change cash flow dynamics if not anticipated.

10. A practical roadmap for travel and tourism SMEs

Before filing 2026 returns

• Reconfirm revenue calculations under accounting standards

• Validate agency vs principal treatment

• Clean up FX and reimbursement classifications

During filing

• Make a deliberate SBR election decision

• Retain supporting schedules and forecasts

• Ensure consistency with VAT filings

Looking beyond 2026

• Prepare for full corporate tax exposure

• Stress-test profitability under normal CT rules

• Review whether current structures remain optimal

How Antravia AE supports SME corporate tax planning

Antravia AE works with travel and tourism SMEs that already understand the basics of UAE Corporate Tax, but need clear, technically sound decision-making as reliefs phase out.

Our work typically includes:

• SBR eligibility reviews and revenue diagnostics

• Free zone versus SBR scenario modelling

• Alignment between accounting, VAT, and CT positions

• Audit-ready documentation frameworks

References

1. Ministry of Finance (UAE)
   Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
   https://mof.gov.ae/corporate-tax-legislation/

2. UAE Cabinet
   Cabinet Decision No. 49 of 2023 on Small Business Relief for Corporate Tax Purposes
   https://mof.gov.ae/corporate-tax-decision-on-small-business-relief/

3. Federal Tax Authority (FTA)
   Corporate Tax Guide – Small Business Relief
   https://tax.gov.ae/en/guides/corporate-tax.aspx

4. Federal Tax Authority (FTA)
   Corporate Tax Guide – Taxable Income and Accounting Adjustments
   https://tax.gov.ae/en/guides/corporate-tax.aspx

5. Federal Tax Authority (FTA)
   Corporate Tax Guide – Free Zone Persons and Qualifying Income
   https://tax.gov.ae/en/guides/corporate-tax.aspx

6. International Accounting Standards Board (IASB)
   IFRS Framework – Revenue Recognition and Income Classification
   https://www.ifrs.org/issued-standards/list-of-standards/

Disclaimer

This article is provided for general informational purposes only and does not constitute accounting, tax, or legal advice. Regulations and requirements in the United Arab Emirates change frequently, and their application can vary depending on business structure, free zone, or activity type. Antravia AE provides strategic financial and business advisory guidance.
Readers should always verify details directly with the relevant UAE authorities or consult a licensed local professional before making business or financial decisions.