BASIC TAX INFORMATION FOR NATURAL PERSON

Important Tax Information for Individuals: “A Guide to UAE Corporate Tax for Natural Persons”

This guide is for any natural person (i.e., individual) seeking to understand:

• When are individuals subject to UAE Corporate Tax?
• Which types of income are taxable under Corporate Tax for individuals?
• What is the Corporate Rate for Individuals?
• What is the Tax Period for individuals under the Corporate Tax Law?
• When must individuals register for Corporate Tax purposes?
• What are the other compliance requirements for individuals under the Corporate Tax Law?

Natural persons are considered taxable under the UAE Corporate Tax Law if they:

• Conduct a business or business activity in the UAE?
• Have a permanent establishment, or
• Earn income sourced from the UAE

However, a natural person is only subject to Corporate Tax if their total turnover from business activities in the UAE exceeds AED 1 million in a calendar year starting from 1 January 2024. If the turnover is below this threshold, they are not required to register for or pay Corporate Tax on their business income.

Wages (employment income), personal investment income, and real estate investment income are not subject to Corporate Tax and are excluded from the AED 1 million threshold.

Any activity conducted in the UAE by a natural person is subject to Corporate Tax and counts toward the turnover threshold. However, income from the following categories exempt from the Corporate Tax and not included in the turnover threshold, regardless of the amount.

• Wages: Income received by an employee as a compensation for services under an employment contract including cash or in-kind benefits. Wages are not subject to Corporate Tax
• Personal Investment Income: Dividends, interest, and gains or losses from the sale of investments are exempt from Corporate Tax if the investment activity is personal, not requiring a license, and not considered a commercial business.
• Real Estate Investment Income: Income derived from the ale, leasing, or renting of real estate by a natural person is not subject to corporate tax provided it is not conducted through a licenses business or requiring a license from a UAE Licensing Authority.

When a natural person’s turnover from business activities exceeds AED 1 million in Gregorian calendar year, their taxable income will be subject to Corporate Tax at the following rates:

• 0% on the portion of taxable person up to AED 375,000.
• 9% on the portion of taxable income exceeding AED 375,000.

The tax period for a natural person is the Gregorian calendar year from 1 Januaryto 31 December. Therefore, the first potential tax period for natural persons will be the 2024 calendar year, from 1 January 2024 to 31 December 2024.

If a natural person exceeds this threshold during the 2024 calendar year or later, they must complete their Corporate Tax registration by 31 Match of the following year. For example, if Mr. A’s turnover exceeds AED 1 million on July 2024, he must register by 31 March 2024 and file his Corporate Tax return by 30 September 2025.

Failure to register within the deadline will result in an administrative penalty AED 10,000.

If a natural person who has registered for Corporate Tax with the Federal Tax Authority (FTA) and later finds their turnover falls below the 1 AED million threshold in a subsequent calendar year should not deregister, unless they have stopped conducting business activities. They will retain their Tax Registration Number and are required to file a “nil” tax return by 30 September of the year following the end of the calendar year in which their turnover from business activities in the UAE does not exceed AED 1 million.

A natural person who is taxable person must generally follow the accrual basis of accounting. However, they may use the cash basis if their turnover from the business activities does not exceed AED 3 million, or if approved by the FTA in exceptional cases.

Financial statements should generally be prepared in accordance with International Financia Reporting Standards (IFRS). However, if their turnover does not exceed AED 50 million, they may apply the IFRS for small and medium-sized entities (SMEs).

These financial statements should reflect the aggregation of all business activities subject to Corporate Tax conducted by the natural person.

If a natural person’s turnover from business activities exceeds AED 50 million, they are required to prepare and maintain audited financial statements for the relevant tax period.

Additionally, natural persons conducting business activities subject to Corporate Tax must retain all records and documents for 7 years after the end of the relevant period.

A natural person who is taxable person must file a Corporate Tax return with the FTA no later 9 months after the end of the relevant tax period. They are required to submit a single tax return covering all their businesses and businesses activities subject to Corporate Tax.

How MACKA can help?

A tax agent can help identify the basic tax information for a natural person by providing guidance on various aspects of their tax obligations and filing requirements

By consulting a tax agent, you’ll ensure that you are fully compliant with tax laws and you understand your rights and obligations as tax payer.

They can also help you optimize your financial situation by ensuring you take advantage of any credits, deductions, or exemptions available to you.

Frequently Ask Questions