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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