How does the UAE Corporate Tax Apply to individuals?

One serious question has been tormenting everyone right from the time when the government announced corporate tax: “Does the UAE corporate tax apply to individuals?” Article 11 of the UAE corporate tax law states that “A natural person who conducts a Business or Business Activity in the State” is subject to corporate tax. However, the business community was seeking more clarity on the conditions that make a natural person subject to the UAE corporate tax.

The UAE Cabinet of Ministers recently issued Cabinet Decision No. (49) of 2023 which brings more clarity on the applicability of corporate tax on individuals. The decision specifies the categories of businesses or business Activities conducted by an individual that are Subject to Corporate Tax in the UAE. Individual business owners can consult with corporate tax consultants in Dubai to take further action based on the Cabinet Decision. Read ahead to understand how the UAE corporate tax applies to individuals:

Who will be Subject to Corporate Tax in the UAE?

As per Cabinet Decision No 49 0f 2023, businesses or business activities conducted by a resident or non-resident individual will be subject to corporate tax if the total turnover from the business exceeds the threshold of AED 1,000,000 within a Gregorian calendar year (January-December). From a corporate tax perspective, the turnover will be the gross amount of income derived during a Gregorian calendar year. Corporate tax advisers in Dubai can help you properly assess your corporate tax obligation based on corporate tax law and cabinet decisions.

Exemption to Income Derived from Certain Activities

Activities that give rise to turnover from the following sources will not be considered as Businesses or Business Activities conducted by a resident or non-resident natural person subject to Corporate Tax, regardless of the amount of Turnover derived from such activities:

1. Wage

An individual will not be subject to corporate tax in the UAE based on his or her wage. The corporate tax exemption applies to the wage that is given to the employee in consideration of their services under the employment contract. Wage can be in cash or in kind, payable annually, monthly, weekly, daily, hourly, or piecemeal. It covers all allowances, and bonuses in addition to any other benefits provided for, in the employment contract or in accordance with the applicable legislation in the UAE.

2. Personal Investment

Any investment made by individuals towards their personal account will be exempted from the UAE corporate tax if it is conducted through neither a Licence nor requiring a Licence from a Licensing Authority in the UAE, nor considered as a commercial business in accordance with the Federal Decree-Law No. 50 of 2022.

3. Real Estate Investment Income

Real investments are also exempted from the purview of the UAE corporate tax. It is defined as any investment activity conducted by a natural person related to, directly or indirectly, the sale, leasing, sub-leasing, and renting of land or real estate property in the UAE that is not conducted or does not require to be conducted through a Licence from a Licensing Authority.

UAE Corporate Tax Registration for Individuals

Individuals conducting a business activity that generates a turnover exceeding the mandatory threshold need to carry out corporate tax registration in the UAE. However, individuals that are not conducting a Business or Business Activities subject to Corporate Tax in accordance with the Cabinet Decision need not register for Corporate Tax. Corporate tax consultants in Dubai can further advise you.

Hire the Best Corporate Tax Advisers in Dubai, UAE

The Cabinet Decision No. (49) of 2023 is a huge relief to natural persons because incomes such as wages, personal investment income and real estate income (without licensing requirements) have been exempted from taxability under the UAE corporate tax regime. In addition, the business community has more clarity on the turnover threshold that makes them liable to register for corporate tax in the UAE. However, it is advisable to consult with corporate tax consultants in Dubai such as Jitendra Chartered Accountants (JCA) before taking any immediate action.

Being one of the leading providers of corporate tax consulting services in Dubai, JCA can guide you on how to proceed with tax obligations. Our corporate tax consulting services in Dubai include CT Assessment & Advisory Services (on a one-time or retainer basis), CT Transfer price assessment services, CT Compliance Services & CT Agent Services to Represent the Federal Tax Authority (FTA) of UAE in case of any notices served by FTA. Ensure corporate tax compliance and avoid relevant penalties by availing of JCA’s corporate tax services in Dubai, UAE. Talk to our consultants for tax solutions that you can count on.