The UAE has announced a new ministerial decision outlining rules on who should and should not pay Corporate Tax in the country.

The new rules, announced on Wednesday, 17 May 2023 confirm that business owners in the UAE will only be liable to pay Corporate Tax if the turnover from the business activity is more than AED1m ($272,000) per year.

Furthermore, any individual’s income from real estate and personal investment will not be considered as taxable income.

UAE tax rules

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.

The decision aims to clarify the application of the Corporate Tax regime for individuals and ensure that only business or business-related activity income is taxed, while 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 AED1m 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 AED1m, under the new decision, the UAE resident business income from the online business would be subject to Corporate Tax.

However, if the United Arab Emirates 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.

The decision will be seen as a boost for small businesses and start-ups.

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.”

Source: UAE announces major tax rule update for residents – Arabian Business