The UAE has announced a new ministerial decision, establishing guidelines regarding the eligibility of paying Corporate Tax within the country.
The recently announced regulations affirm that business proprietors in the UAE will only be obligated to pay Corporate Tax if their annual business activity turnover exceeds AED1m ($272,000). Moreover, income derived from real estate and personal investments will not be subject to taxation.
UAE tax rules updates
The Ministry of Finance has announced the release of UAE Cabinet Decision No. (49) of 2023, which addresses the treatment of both resident and non-resident individuals engaged in business or business activities for the purpose of the Corporate Tax Law.
The objective of this decision is to provide clarity on the implementation of the Corporate Tax system for individuals, ensuring that only income derived from business or business-related activities is subject to taxation. It further emphasizes that personal income, including employment income, investments, and real estate (without licensing requirements), is not liable to be taxed under the Corporate Tax framework.
Individuals involved in business or business activities will only be required to comply with Corporate Tax obligations and registration criteria if their total turnover exceeds AED1m in a given calendar year.
As an illustration, let’s consider a scenario where a UAE resident runs an online business, and the total annual turnover generated by this business surpasses AED1m. According to the newly introduced decision, the business income derived by the UAE resident from the online venture would be subject to Corporate Tax.
Nevertheless, if the UAE resident also earns income from rental property and personal investments, these income sources would not be subjected to Corporate Tax, as they fall into categories that are exempted from its scope.
This decision is expected to provide significant support to small businesses and start-ups, thus acting as a catalyst for their growth.
Younis Haji Al Khouri, the Undersecretary of the Ministry of Finance, expressed, “The recently introduced Cabinet Decision showcases the UAE’s dedication to upholding a transparent and competitive tax framework that benefits both local and foreign individual investors.”
He further highlighted, “Through the streamlining of the Corporate Tax system, the UAE remains committed to cultivating a favorable business climate that nurtures the expansion of small businesses, startups, and the overall economy.”
All Cabinet Decisions, Ministerial Decisions, and accompanying explanatory guides pertaining to the Corporate Tax Law can be accessed on the official website of the Ministry of Finance.
