The Ministry of Finance has announced the issuance of UAE Cabinet Decision No. (49) of 2023, which pertains to the treatment of individuals, both resident and non-resident, engaged in business or business activities for the purpose of Corporate Tax Law.
UAE’s dedication to maintaining a transparent and competitive tax framework that benefits local and foreign individual investors. By streamlining the Corporate Tax system, the UAE aims to create an appealing business environment that fosters the growth of small businesses, startups, and the overall economy.
The objective of this decision is to provide clarity on the application of the Corporate Tax regulations for natural persons, ensuring that only income derived from business or business-related activities is subject to taxation. It also emphasizes that personal income, such as earnings from employment, investments, and real estate (excluding licensed activities), is not liable to Corporate Tax. Individuals engaging in business or business activities will be required to register and pay Corporate Tax only if their total turnover exceeds AED1 million in a calendar year.
Businesses or Business Activities, conducted by a resident or non-resident natural person, shall be subject to Corporate Tax only where the total Turnover derived from such Businesses or Business Activities exceeds AED 1,000,000 (one million United Arab Emirates dirhams) within a calendar year.
To illustrate, suppose a UAE Resident/Non-Resident operates an online business, and the combined annual turnover from this venture surpasses AED1 million. In that case, the new decision mandates that the business income generated by the UAE Resident/ Non-Resident from the online business would be subject to Corporate Tax. However, any income derived from rental properties or personal investments by the UAE Resident would not be subject to Corporate Tax, as these sources fall outside the scope of taxation.
According to the decision:
• Individuals who conduct businesses or business activities will be subject to corporate tax only if their total income from these activities exceeds AED 1,000,000 in a calendar year.
• However, certain activities are exempt from corporate tax, regardless of the income earned. These activities include wages received from employment, income from personal investments, and income from real estate investments.
The decision also states that individuals who are not conducting businesses subject to corporate tax are not required to register for corporate tax.
The Minister of Finance has the authority to issue any necessary decisions to implement this decision.
The decision will be published in the Official Gazette and will come into effect on June 1, 2023.
All relevant Cabinet Decisions, Ministerial Decisions, and explanatory guides regarding the Corporate Tax Law can be accessed on the Ministry of Finance website: www.mof.gov.ae.