Ministerial Decision No. 49 of 2023 specifies “Business” or “Business Activities” of a natural person which are subject to corporate tax
Corporate Tax Law Provisions
- Natural Person is subject to corporate tax only in respect of the income from business or business activities conducted in the UAE.
Recent Ministerial Decision – Guidelines for “Business” or “Business Activities” of a natural person
- Natural person (resident or non-resident) would be subject to corporate tax only if total turnover from Business or Business activities in a calendar year exceeds AED 1 million.
- Following activities not to be considered as Business or Business activities:
- Wages – Payment to the employee in consideration of services i.e. salary or wages, allowances, bonuses or any other benefits.
- Personal Investment Income – Conducted for personal account (without license or licensing requirement), nor considered as “Commercial Business”; and
- Real Estate Investment Income – Sale, leasing, sub-leasing and renting of land or real estate property in the UAE, without license or licensing requirement.
- Natural person not subject to corporate tax – Corporate tax registration not required
MCA Comments
- This is one of the key decisions of the corporate tax law. It gives clarity for taxability in the hands of natural person (whether resident or non-resident).
- Higher turnover threshold of AED 1 million, will give relief to small and medium businesses.
- Turnover threshold to be determined aggregating turnover of all business or business activities of a natural person.
- For meaning of the term ‘Commercial Business’ (in the context of personal investment income), the Federal Decree Law No. 50 of 2022 needs to be referred.
- Investment and Real Estate income earned from activities conducted through a license or requiring a license, would be subject to corporate tax.
- Natural Person subject to corporate tax, should maintain separate books of accounts, records etc. for its business or business activities.
- Turnover threshold of AED 1 million is required to be calculated basis calendar year. Clarification from the FTA, for natural person following different financial year (i.e. other than calendar year) would be helpful.
Disclaimer: UAE Corporate Tax (CT) Law has been recently introduced. This is a summarised version of the CT legislation and it is advised to refer to the detailed law provisions prior to initiating any decisions.
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