Who must pay corporate tax in the UAE is determined by cabinet resolution, according to the Ministry of Finance
A new ministerial ruling defining who must and cannot pay corporate tax in the UAE has been made public. According to the new regulations, which went into effect on Wednesday, May 17, 2023, UAE business owners will only be required to pay Corporate Tax if their annual revenue from their operations exceeds AED 1m ($272,000).
Additionally, no one’s income from personal investments or real estate will be regarded as taxable income.
The UAE Cabinet Decision No. (49) of 2023 on the handling of residents and non-residents engaging in business or commercial activity for the purposes of the Corporate Tax Law was published, according to the Ministry of Finance.
The ruling intends to ensure that only income from businesses or activities related to enterprises is subject to taxation and that it is clear how the Corporate Tax framework applies to individuals. Additionally, it makes it plain that personal income is exempt from corporate tax, including income from jobs, investments, and real estate (without the need for a license).
Individuals conducting business or company operations will only be subject to corporate tax and registration requirements if their combined yearly turnover reaches AED 1m.
For instance, under the new ruling, a UAE citizen’s business revenue from an internet firm would be subject to Corporate Tax if the cumulative yearly turnover from the business exceeded AED1 million. This individual is a UAE resident.
However, if the resident of the United Arab Emirates additionally receives income from personal investments and a rental property, these sources of income would be exempt from corporate taxation because they fall under the exempt categories.
The ruling will be viewed as a boost for startups and small enterprises.
Younis Haji Al Khouri, Undersecretary of the Ministry of Finance, said: “The new Cabinet Decision demonstrates the UAE’s commitment to maintaining a clear and competitive tax framework for both local and foreign individual investors.
“By simplifying the Corporate Tax system, the UAE continues to foster an attractive business environment that supports the growth of small businesses, startups, and the overall economy.”
