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22 April 2024

UAE Cabinet Issues a Decision Regarding the Tax Treatment of Individuals Engaged in Business Activities

Published
By E247
  • The Decision supports the growth of small businesses and startups
  • The Decision avoids bringing non-business income for natural persons (individuals) into the scope of Corporate Tax, including wages or personal investment income, among others.
 
The Ministry of Finance announced the issuance of UAE Cabinet Decision No. (49) of 2023 on the treatment of resident and non-resident individuals undertaking a business or business activity, for the Corporate Tax Law purposes.
 
His Excellency 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."
 
The decision aims to clarify the application of the Corporate Tax regime for natural persons ('individuals' in this context) and ensure that only business or business-related activity income is taxed, whilst clarifying that personal income notably from employment, investments and real-estate (without licensing requirements) is not subject to Corporate tax. Individuals conducting business or business activities will be subject to Corporate Tax and registration requirements only if their combined turnover exceeds AED1 million in a calendar year. 
 
For example, if an individual who is a UAE Resident operates an online business and the combined annual turnover from this business exceeds AED1 million, under the new decision, the UAE Resident business income from the online business would be subject to Corporate Tax. However, if the UAE Resident also earns income from a rental property and personal investments, these sources of income would not be subject to Corporate Tax as they fall under the out-of-scope categories.
 
All Cabinet Decisions and Ministerial Decisions as well as explanatory guides relating to the Corporate Tax Law are available on the Ministry of Finance website: www.mof.gov.ae