UAE issues guidelines to determine corporate tax liability for individuals
Introduction:
The UAE Federal Tax Authority has issued guidelines for determination of Corporate Tax liability on Individuals.
The guide provides a “comprehensive and simplified” explanation and instructions for natural persons making income in the UAE.
The term natural person refers to a “living human person of any age, whether resident in the UAE or elsewhere”.
A Summary of the guidelines:
1. A natural person must register for corporate tax purposes and obtain a Tax Registration Number if their total turnover from business or business activities exceeds Dh1 million ($272,294) within a calendar year from 2024.
2. Income from wages, personal investment and real estate shall not be considered as arising from business activities.
3. Where a UAE non resident natural person conducts a business in UAE, he shall also be subject to corporate tax.
4. A natural person residing outside UAE may also be a non resident natural person and not subject to corporate tax in case they derive state sourced income ie income derived from UAE but not through business activities conducted in UAE.
5. Corporate tax rate is 9%.
6. Interest deduction cap of 30% applicable to corporates is not applicable to natural persons and the entire interest expense is tax deductible.
7. Transactions of natural persons with related parties shall be required to follow the arms length principle.
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