UAE clarifies corporate tax on Residents undertaking a business or business activity
By BMS AUDITING
Individuals conducting business activities will be subject to Corporate Tax registration only if their turnover exceeds AED 1 million in a calendar year.
The UAE Cabinet Decision No. (49) of 2023 on the Treatment of Resident and Non-resident Individuals Undertaking a Business or Business Activity for Corporate Tax Law Purposes was issued by the Ministry of Finance. The decision is intended to:
- Clarify how the Corporate Tax system applies to people.
- Ensure that only income from business or business-related activities is taxed.
The judgment further establishes that personal income derived from employment, investments, and real estate (without the necessity of a license) is exempt from Corporate Tax.
Main Takeaway: Individuals engaging in business or business activities in the UAE are generally subject to corporate tax and registration requirements. However, it's important to note that these requirements apply only if their combined turnover exceeds AED 1 million in a calendar year.
When the total turnover of an individual's business operations surpasses the specified threshold of AED 1 million, they become liable to register for corporate tax purposes.
Another Case:
Irrespective of the condition mentioned earlier, certain business activities conducted by resident or non-resident natural persons will not be considered as businesses or business activities subject to Corporate Tax, regardless of the amount of turnover derived from them. This applies to activities that generate turnover from the following sources:
- Wage.
- Personal Investment income.
- Real Estate Investment Income.
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