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Attention all individuals in the UAE!

The Federal Tax Authority recently issued a guide for ‘natural persons’, regarding income generated within the country. This guide aims to help ‘natural persons’ understand whether they are liable to pay corporate tax. To make it easier for you, we have highlighted the key considerations.

Also towards the end of this article, you’ll be able to review the entire guide!

Purpose of the guide

In the introduction we used the term ‘natural persons’ which refers to an individual of any age, either residing in the UAE or elsewhere. And for those underaged or with disabilities, their corporate tax obligations are fulfilled by their legal representatives.

This guide is an essential read for all ‘natural persons’ as it delivers a comprehensive overview of the taxation framework under the Corporate Tax Law. It answers key questions, such as:

  • When does the Corporate Tax Law apply to natural persons?
  • How is Corporate Tax for natural persons calculated?
  • What is the interaction like with other businesses?
  • How should natural persons comply with the Corporate Tax Law?

The aforementioned guide is to be used alongside the general Corporate Tax Law rules, implementing decisions and any other pertinent guidance provided by the FTA. In essence, it’s a valuable resource that aids natural persons in understanding how the law applies to them specifically. So, irrespective of your age or residence, grab this guide and acquaint yourself with your tax responsibilities today!

The key considerations

Major factors that determine whether you are subject to Corporate Tax in the UAE includes various factors. Firstly, engaging in business or professional activities within the UAE puts you in the category of a taxable person. Secondly, a vital monetary threshold to be aware of is a total turnover exceeding AED 1 million in a year from UAE business activities. Crossing this threshold means you’re required to adhere to the obligations of the Corporate Tax Law.

Importantly, income sources like wages, personal investments, and real estate investment income are excluded and not subject to corporate tax; no matter the sum. If your turnover from business activities in the UAE surpasses the AED 1 million mark, you, whether resident or non-resident, are obliged to register for Corporate Tax. Plus you should submit Corporate Tax Returns and ensure timely payment of your Corporate Tax.

Personal income tax liabilities

Key elements of your income, such as wages from employment, income from personal investments, and returns from real estate investments, are not subject to Corporate Tax. These income streams are also not considered when assessing whether your annual turnover exceeds the AED 1 million threshold. This means, for instance, if you receive an ‘in-kind’ payment related to your business or professional activities, the market value of that payment contributes to your turnover. Yet, if your total turnover from business activities within the UAE doesn’t surpass AED 1 million within a Gregorian calendar year, you’re not required to register or pay Corporate Tax.

In summary, the focus of taxable income is solely on the income generated from business activities you conduct in the UAE. So don’t worry, personal income still isn’t taxable in the UAE; making the country even more attractive!

Business activities tax liabilities

If your turnover crosses the AED 1 million mark within a Gregorian calendar year, brace yourself for Corporate Tax obligations. For resident persons, taxable income encompasses income earned both within and outside the UAE, as long as it’s linked to the business operations conducted in the UAE. The components of these operations might include: management, business development, and asset production all taking place in the UAE.

On the flip side, non-resident individuals whose business activities in the UAE generate a turnover exceeding AED 1 million will have their taxable income restricted to income originating from the UAE. Keep in mind, ‘turnover’ signifies your gross income before deducting any costs. Be vigilant, as this rule applies to every single business activity you carry out in the UAE, regardless of whether you’re a resident or non-resident.

Accessing the guide

Accessing the UAE Corporate Tax guide is as straightforward as it gets. You can easily find it on the FTA website. This platform is regularly updated with the latest tax-related news and regulations, making it an essential resource for all. It’s strongly advised that you familiarise yourself with the FTA website and check it periodically to stay in the loop.

For those seeking the specific guide discussed in this article, there’s no need to worry about lengthy search sessions. To ease your navigation, click the below button to access the guide…

Determining next steps

Our team stands ready to support all individuals and business owners in the UAE in understanding their tax liabilities. Whether you’re just starting out or you’re an established business entity, comprehending UAE corporate tax laws can be complex. We’ll provide a tailored approach, breaking down complex regulations into digestible information that pertains to your specific situation.

If you’re a UK individual, or from Cyprus, Malta, or Portugal, we can also help decipher double tax treaties. Remember, initial meetings are free, and for more specific or technical queries, we offer paid consultations. Let us help you navigate your tax obligations with ease.

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