Whether Individuals With 1 Million AED Turnover Should Pay Corporate Tax in UAE?
People in the United Arab Emirates (UAE) want to know about corporate tax rules for individuals and small business owners. Many wonder if someone with a turnover of more than 1 million AED needs to pay corporate tax. This article will explain the rules, the latest updates, and what you must do to stay compliant in the UAE.
UAE’s 1 Million AED Turnover Rule: What’s the Latest News?
People have talked about the 1 million AED turnover rule. Many business owners in the UAE asked if they must pay corporate tax just because their business earns more than this amount. The Ministry of Finance answered this with a new Cabinet decision.
- The UAE government made Cabinet Decision No. (49) of 2023.
- The law says business owners must pay corporate tax if their total business turnover goes above 1 million AED in one year.
- This decision explains how the corporate tax regime works for UAE residents and non-residents.
The new law only taxes business income. If a person earns money from a job, an investment, or rental property, this income will not be taxed as corporate tax. Only profits from a business or licensed commercial activity will be counted.
For example, if a person runs a shop in Dubai and their annual sales go over 1 million AED, their profit will now be taxed at 9%. But, if they only earn money from renting an apartment, they do not have to pay corporate tax on this income.
What Income Is Exempt from Corporate Tax?
- Income from jobs or employment is exempt.
- Income from personal investments is exempt.
- Rental income from property is exempt.
- Only business profits are taxed.
People must keep their business income and personal income separate. If they mix up their income, it could cause trouble with the tax authorities. Every person who owns a business should keep good books of accounts, with clear records for each business activity.
Why Did the UAE Introduce This Rule?
The UAE wants to make tax rules clear for everyone. The government wants to support small businesses and encourage people to open new companies in the UAE.
- The UAE keeps personal incomes like salaries tax-free.
- Small businesses with less than 375,000 AED profits do not pay tax.
- The government also gives relief to companies with under 3 million AED revenue until 2026.
This shows the UAE wants to grow business but also have fair taxes for everyone.
What Happens If Your Turnover Is Over 1 Million AED?
If a business in the UAE earns more than 1 million AED in one year, the owner must pay corporate tax on the profits from the business.
- The corporate tax rate is 9% for profits above 375,000 AED.
- The owner must register the business for tax.
- The owner must file tax returns on time.
- The business must keep records and accounts as required by law.
Business owners must be careful. Just crossing the 1 million AED mark in personal income does not mean you pay corporate tax. You only pay tax on business profits that cross the law’s limit.
Tips for Individuals and Small Business Owners
- Separate your business and personal accounts.
- Track all business sales and expenses.
- Register your business if you cross the turnover threshold.
- File your tax returns every year.
- Consult experts if you are not sure about the law.
Who Can Help You with UAE Corporate Tax?
Specialist consultants, like Mubarak Al Ketbi (MAK) Auditing, can help you register your business, file your taxes, and follow all the rules. They keep up with all the new laws, so you do not miss any update. They also help you keep your documents ready, so you do not face any trouble from the tax authority.
How Mubarak Al Ketbi (MAK) Auditing Can Help You
Mubarak Al Ketbi (MAK) Auditing can help you with every step of business compliance in the UAE. Our experts can explain the law, guide you with registration, and keep your records ready. We use technology to make tax filing simple, and our team follows every update from the Ministry of Finance. With us, you’ll never be left high and dry, because we handle your tax matters with care!
- For more information, visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates - Or contact/WhatsApp us at +971 50 276 2132
