Natural Persons

Taxability of Natural Persons

The Corporate Tax Law applies to Natural Persons i.e. Individuals regardless of their citizenship or UAE visa status, that have generated an annual turnover exceeding AED 1 million in a Gregorian calendar year, from a 'Business' of 'Business Activity' conducted in the UAE. Such Natural Persons will be considered a Resident Person for UAE Corporate Tax purposes

Natural Persons who meet the above criteria are required to comply with the obligations of the Corporate Tax Law, including registration for Corporate Tax purposes with the FTA, submitting Corporate Tax Returns and paying Corporate Tax.

The annual turnover of AED 1 million will exclude income generated by a Natural Person from the following sources, which are not considered as Businesses or Business Activities:

Employment income,
Personal Investment income,
Real Estate Investment income

Taxable Income

The Taxable Income for a Tax Period will be the accounting net profit (or loss) of the business, after making adjustments for certain items specified in the Corporate Tax Law and related implementing decisions.

The accounting net profit (or loss) of a business is the amount reported in its financial statements prepared in accordance with International Financial Reporting Standards (IFRS).

Can a natural person elect for the application of the Small Business Relief?

Yes, the natural person that is subject to Corporate Tax may elect for the application the Small Business Relief, provided they meet the conditions in Ministerial Decision No. 73 of 2023.

What is “Small Business Relief”?

Small Business Relief releases certain businesses from the obligation to calculate and pay Corporate Tax and from having to comply with the regular Corporate Tax reporting requirements.

An eligible Taxable Person with Revenue of AED 3 million or below in the relevant Tax Period that ends on or before 31 December 2026 and prior Tax Periods can elect to be treated as having no Taxable Income in that Tax Period and will not have to calculate its Taxable Income or file a full Corporate Tax Return.

If a Taxable Person’s Revenue exceeds AED 3 million in any Tax Period, they will no longer be eligible for Small Business Relief for that Tax Period and any future Tax Periods.

Will a natural person be subject to UAE Corporate Tax on business income earned outside the UAE?

The Taxable Income of a natural person is all the income that is derived from the Business or Business Activity they conduct in the UAE. This would include income earned from outside the UAE insofar as it relates to the Business or Business Activity conducted by the natural person in the UAE.

What happens if a natural person has multiple Businesses, or conducts multiple Business Activities?

In the case where several Businesses or Business Activities are conducted by one natural person, the aggregate of all Businesses and Business Activities will be considered when determining whether it exceeds the AED 1 million annual Turnover threshold.

Business / Business Activity

“Business” means any economic activity, whether continuous or short term, conducted by any Person. It is implied that a Business is conducted with a profit motive, and that there is the existence of some system and organisation to the activity conducted. However, a Business or Business Activity for UAE Corporate Tax purposes does not lose its identity simply because it does not make a profit.

The definition expressly includes any industrial, commercial, agricultural, vocational, professional or service activity, excavation activity and any other activity of an independent character related to the use of tangible and intangible properties.

The term “vocational” is to be interpreted as a skilled craft or trade, and “profession” is an occupation in which skill is applied to the affairs of others to meet their needs.

The definition of a “Business Activity” is wider than that of a “Business”, and includes any transaction, step, or other element or action undertaken by or as part of a Business, which may be carried out entirely or partially within the UAE.

For the application of the Corporate Tax Law to companies and other juridical persons, all activities conducted, and assets used or held will generally be considered activities conducted, and assets used or held, for the purposes of a “Business”.

The terms “Business” and “Business Activity” is defined in the Corporate Tax Law as follows:

Business: Any activity conducted regularly, on an ongoing and independent basis by any Person and in any location, such as industrial, commercial, agricultural, vocational, professional, service or excavation activities or any other activity related to the use of tangible or intangible properties.

Business Activity: Any transaction or activity, or series of transactions or activities, conducted by a Person in the course of its Business.

These terms identify when the activities of certain Persons give rise to a UAE Corporate Tax liability by considering the Person to be a Taxable Person.