Corporate Tax in the UAE

Whether Individuals With 1 Million AED Turnover Should Pay Corporate Tax in UAE? The taxation structure in the United Arab Emirates (UAE) has gained a lot of attention in recent times. There are various speculations regarding whether individuals and business activities registered in the UAE with an annual turnover exceeding 1 million AED are liable to pay corporate income tax. Let’s explore more about this topic in this blog. Speculations Around 1 million AED Threshold There has been ongoing speculation regarding whether individuals and businesses in the UAE could face corporate tax obligations if their annual turnover exceeds 1 million AED. Recently, the UAE Ministry of Finance provided clarity on this issue by announcing a new Cabinet decision. As per Cabinet Decision No. (49) of 2023, business owners in the country will be subject to corporate tax only if their combined turnover in a calendar year exceeds Dh1 million (around $272,294). The aim of the decision is to clarify how the corporate tax regime will apply to UAE residents and non-residents. Importantly, the Ministry has confirmed that personal income from sources like employment, investments, and real estate will not be taxed. So corporate tax liability will arise solely based on business or licensed commercial activity income earned by a taxpayer. For instance, if a sole proprietor generates over 1 million AED in annual revenues from their combined retail business registered in the mainland UAE, the profits of that business would now be subject to the 9% corporate tax rate. However, rental incomes or returns from personal investments would fall outside the tax net as per the clarification. Proper segregation of individual and commercial sources of earnings is therefore important. This move provides certainty to small businesses that were uncertain about crossing the speculated 1 million AED thresholds. It maintains the UAE’s growth-focused approach without disincentivizing entrepreneurship and encourages more firms to set up locally. The decision is testimony to the government’s aim of adopting a clear, consistent, and stable regulatory regime that fosters investment. Keeping personal incomes like employment compensation tax-free also protects individual taxpayers. Recently, the UAE issued its federal corporate tax law imposing a 9% rate on taxable annual profits exceeding 375,000 AED. Small businesses with revenues below that were kept tax-exempt. Additionally, in April 2023, the Ministry launched a Small Business Relief program exempting firms with under 3 million AED in annual revenue from tax liabilities for an initial period until the end of 2026. This provides headroom for SME growth. Keeping these broader context points in mind, the new Cabinet Decision provides much-needed clarity. It establishes that crossing an annual turnover mark alone does not automatically trigger corporate tax exposure for individuals in their personal capacity. Tax responsibilities will emerge only from income streams covered under the tax law, like profits generated via business operations. Maintaining robust books of accounts segregating commercial and personal activities is thus important. Overall, individuals operating registered businesses in the UAE can breathe easy knowing that exceeding 1 million AED in revenues will not by itself land them in a tax liability trap. Proper strategic compliance continues to be advised, though, to pre-empt uncertainties. Consultants specializing in the UAE market can help entities and entrepreneurs incorporate, file necessary setups, and handle reporting requirements upon commencing operations. The technology solutions offered by them simplify regulatory adherence remotely. In conclusion, through this new Decision, the UAE Ministry of Finance has provided the necessary clarification. As long as commercial revenues are appropriately ring-fenced, individual business owners will not have to worry about corporate taxation due to high personal turnovers alone. The nation’s pro-business ecosystem is thereby reinforced further. Proper entity segregation and knowing the distinction between corporate and personal tax obligations is key. Overall, the UAE’s stable business-conducive regime is expected to continue with calibrated fiscal reforms if needed. AB CAPITAL SERVICES for your assistance Consultants like AB CAPITAL can help businesses in corporate entities, file necessary setups, and handle VAT and corporate tax documentation requirements. Our specialists track policy updates, advising clients on implications. Technology-enabled services allow remote regulatory compliance and reporting. The experienced tax consultants at AB CAPITAL can assist you in getting your tax liabilities sorted and staying complied to all the tax laws prevailing in UAE. AB CAPITAL can help you navigate your taxable income and maintain all the required documents that may be mandatory. To know more about our personalized services, feel free to contact us now.

Will a Freelance Professional be Subject to UAE Corporate Tax? As per the regulations of corporate tax in the UAE, any taxable income exceeding AED 375,000 will be subject to Corporate Tax. This tax system will also be applicable to freelancers and independent contractors in the UAE who work for themselves if their income goes beyond the AED 375,000 limit. Before heading deeper into how UAE corporate tax applies to freelancers, let’s take a look at the diverse aspects of corporate tax and implications. UAE Corporate tax Being the pro-business hub, the nation provides businesses with unparalleled access to cutting-edge infrastructure, technological advancements, 100% foreign ownership, and a tax-free culture. These advantages draw hundreds of professionals to the UAE each year in search of intriguing career prospects. This is why the Ministry of Finance of the UAE published Federal Decree-Law No. 47 of 2022, which establishes the legal foundation for corporate tax on commercial profits in the UAE. The UAE has taken this step to follow international norms and comply with Pillar 2 of the OECD’s Global Minimum Tax Plan. According to the law, starting with their first fiscal year beginning on or after June 1, 2023, taxable individuals and businesses must pay a 9% corporation tax. It is critical to assess how the UAE corporate tax will apply to both individuals and businesses in the future given that it is the first time the country has chosen to impose it. Do Freelancers Have to Pay Corporate Tax? The Corporate Tax regime will also apply to freelancers in UAE and other independent contractors who work for themselves if their income exceeds the AED 375,000 threshold. The law dictates that these independent contractors must have a license or permit. Many eventualities that apply the corporate tax for freelancers are as follows: • Those who have the new freelance permit, which is provided under the new labour law for self-sponsored expatriates, are not required to pay corporate tax on their profits. • If freelancers with business licenses are sponsored in a free zone and engage in any activity for other businesses, the sponsor will be charged corporate tax. • Freelancers who work for a business will not be subject to income tax on the money they make from salaries; rather, the business that issues the visa will be subject to income tax on its net profit. Corporate Tax for Freelancers: Exemptions The following situations are where the corporate income tax law in the UAE exempts individual or freelancer profits made in their capacity: • Interests, profits, and other earnings made by a person residing in the UAE from bank deposits or savings plans. • Income derived from real estate investments by individuals in their capacity. • Dividends, capital gains, and other income received by individuals from their ownership of shares or other securities How can AB CAPITAL assist the Freelancers in UAE? Business owners have always regarded the UAE as a tax-free oasis. By introducing the new corporate tax regime, the UAE intends to follow worldwide best practices in developing a leading global hub for businesses while advancing the nation’s strategic objectives for further growth. Whether it’s for the deployment of countermeasures, training personnel, or formulating a compliance policy, our professionals can handle your company’s accounting and auditing demands and assist you in becoming UAE corporate tax ready. If you are a freelancer having any confusion regarding the corporate tax on your income, get in touch with AB CAPITAL’s professionals for your guidance. Also Read: The UAE Awaits: Are You Ready to Invest in the UAE in 2025? How Can a Foreign Company Open a Branch in Dubai, UAE in 2025? Step-by-Step Process of Company Registration in Dubai Free Zone in 2025 How To Open A Company In Meydan Free Zone In 2025? Important Tasks for Your First Financial Year Under the UAE Corporate Tax Law