UAE issues guide to determine corporate tax liability for individuals

The UAE’s Federal Tax Authority has issued a guide for natural persons (individuals) who generate income in the country or do business, to help them determine whether they are subject to corporate tax.

The guide provides a “comprehensive and simplified” explanation and instructions for natural persons making income in the UAE, the FTA said on Sunday.

The term natural person refers to a “living human person of any age, whether resident in the UAE or elsewhere”, according to the FTA.

The guide clarified that a natural person must register for corporate tax purposes and obtain a Tax Registration Number if their total turnover exceeds Dh1 million ($272,294) within a calendar year from 2024.

The guide is available on FTA website: https://tax.gov.ae//Datafolder/Files/Guides/CT/Taxation%20of%20natural%20persons%20-%2025%2011%202023.pdf

Non-resident natural persons are subject to corporate tax in cases where they have a permanent establishment in the UAE with a total turnover exceeding Dh1 million within a calendar year as of 2024, the guide said.

However, certain types of income such as employment income, personal investment income, or real estate investment income, are always exempt from corporate tax for natural persons, the FTA said.

The UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent starting from the financial year beginning on or after June 1.

Globally, corporate tax rates have declined over the past 40 years, with the worldwide average falling from more than 40 per cent to between 25 per cent and 30 per cent, the Tax Foundation in Washington said.

The FTA emphasised the importance of reading the new guide for a clear understanding of definitions related to natural persons who are subject to paying corporate tax.

The guide includes practical examples explaining how the corporate tax law applies to natural persons conducting business in the UAE, whether they are residents or non-residents.

The FTA urged all concerned natural persons (individuals) realising income in the UAE, or conducting business – wholly or partly – in the UAE, to refer to the new guide.