Corporate Tax, also referred to as corporate income tax or business profits tax, is a direct tax levied on the net income or profit of businesses. In the UAE, this includes businesses operated by natural persons. This article will clarify who qualifies as a natural person under the UAE corporate tax regulations.
A “natural person” under UAE corporate tax laws refers to an individual a living human being, regardless of age who is subject to taxation based on applicable regulations. Here are key considerations regarding corporate taxes for natural persons:
A natural person in the UAE is liable for corporate tax if:
When a natural person owns multiple commercial properties and their combined annual rental income surpasses AED 1 million, this income is exempt from taxation under the Corporate Tax Law in the UAE.
However, it’s important to note that these exclusions apply only if the business or activity does not require a license issued by an authorized licensing authority in the UAE.
While most business activities are subject to UAE corporate tax, there are specific income sources exempt from taxation. Below are business activities in the UAE that do not incur corporate tax charges.
Income from Employment: Corporate tax does not apply to salaries and wages of employees, including bonuses and allowances.
Income from Personal Investments: Income, interest, and dividends earned from investments in the personal capacity of natural persons are exempt from tax.
Income from Real Estate Investments: Income earned from direct or indirect investment in land or real estate property in the UAE is not subject to tax, provided such investments do not require a license from a UAE licensing authority.
Natural persons can claim a full tax exemption through the Small Business Relief program. To be eligible, a business must meet specific requirements. For more details, read our article on Small Business Relief.
Filing tax returns involves determining if your business is subject to tax and meticulously calculating your income sources. Without the right accounting software, compiling financial data for tax computation can be challenging.
Using accounting software like Tally Prime can streamline your financial management by organizing all your ledgers and automatically categorizing your income and expenditures. It ensures error-free invoice generation, simplifying tax compliance. With organized financial data readily available, managing your taxes becomes much easier and more efficient.
Businesses often wonder about the tax obligations of non-Emiratis. Regardless of citizenship or visa status, a natural person must pay corporate taxes if their annual turnover from UAE-based businesses exceeds 1 million AED.
The question arises: “Should a natural person pay corporate taxes in the UAE on business income earned outside the country?” According to the law, natural persons must pay corporate taxes on business income earned outside the UAE if the income is derived from a business or business activity conducted within the UAE.
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