UAE issues guide to determine individual corporate tax liability

Accordingly, it outlines criteria for determining whether they are subject to the corporate tax law that went into effect on June 1.

"Natural persons" who generate income in the UAE or do business can use the Federal Tax Authority's guide to determine whether they have to pay corporate tax.

According to the FTA, the guide explains and provides instructions for natural persons making income in the UAE in a "comprehensive and simplified" manner.

The FTA defines a natural person as a "living human being, regardless of their age or residence".

As of 2024, natural persons must obtain a Tax Registration Number if their total turnover exceeds Dh1 million ($272,294) in a calendar year.

The guide can be found on the FTA website:

Corporate tax is applicable to non-resident natural persons whose turnover exceeds Dh1 million within a calendar year with a permanent establishment in the UAE, according to the guide.
A natural person's employment income, personal investment income, or real estate investment income is always exempt from corporate tax, the FTA stated.

Starting with the financial year beginning on or after June 1, the UAE introduced federal corporate tax with a statutory rate of 9 percent.

Over the past 40 years, corporate tax rates have declined worldwide, decreasing from more than 40 percent to between 25 and 30 percent, according to the Tax Foundation in Washington.

It is essential to read the new guide for a clear understanding of definitions related to natural persons subject to corporate tax.

Whether residents or non-residents, the guide explains how the corporate tax law applies to natural persons conducting business in the UAE.

Natural persons (individuals) who earn income or conduct business in the UAE are urged to refer to the new guide.

On the FTA's website, they can find information about corporate tax law, implementation decisions, and other relevant materials.

As the corporate tax law has been implemented this year, new decisions and guides have been released by UAE officials.

A new corporate tax decision was announced by the UAE Ministry of Finance last month.

Some qualifying activities and transactions qualify for zero taxation in free zones.

In addition, income earned through transactions with mainland UAE businesses or foreign businesses can be exempt from taxes, the ministry said.

A fine for noncompliance with corporate tax laws was also outlined by the ministry in June.

Corporate tax dues will be penalized for late filing and payment, including not informing the FTA of changes that may require tax records to be amended.

A penalty can also be imposed if you fail to keep proper records or do not submit the required records and other information.

“Adhering to corporate tax compliance is a responsibility of all taxable persons to support the implementation of the corporate tax system in the UAE, which is in line with the highest global standards," Younis Haji Al Khoori, undersecretary at the Ministry of Finance, said at the time.

For support with Corporate Tax, contact Zyla Accountants today.