Concerning treatment of Natural Persons undertaking a Business or Business activity for Corporate Tax Law purposes.
The UAE’s Ministry of Finance (MoF), on 17thMay, 2023 has announced the issuance of Cabinet Decision no. (49) of 2023 on the treatment of Resident and Non-resident individuals undertaking a business or business activity within the UAE. As per this Cabinet Decision, business owners in the country would be subject to corporate tax only if their turnover in a calendar year exceeds AED 1 Million.
This new decision aims to clarify the application of the corporate tax regime for Residents and Non-residents and ensure that only business or business-related activity would be taxed.
The ministry has also confirmed that the personal income from employment, investments or real estate (without licensing requirements) or any other income earned by individuals that does not arise from a business or any other form of commercial activity (licensed or otherwise permitted to be undertaken within the UAE) will not be subject to corporate tax. This means there will be no tax on personal incomes.
For instance, if a UAE resident operates an online business and the combined annual turnover from the business exceeds AED 1 million, then under the new decision, that income would be subject to corporate tax.
However, if the resident also earns income from a rental property and personal investments, these sources of income would not be subject to the tax, as they fall under the out-of-scope categories.
Further, the new decision emphasizes the UAE’s commitment towards a clear, competitive and the supportive tax framework that fosters growth for small businesses and startups.
Overall, the positive step towards maintaining the UAE’s position as an attractive hub for local as well as foreign individual investors.
More details on this Cabinet Decision will follow. Stay tuned!
