UAE Corporate Tax Law: Federal Decree-Law 47/2022 Guide
What is the UAE Corporate Tax Regime (Federal Decree-Law No. 47 of 2022)? Federal Decree-Law…
What about natural persons or individuals?
Natural Persons (individuals i.e. sole proprietors, freelancers) are subject to corporate tax if they earn above annual turnover threshold of AED 1 million. Note that business income vs salary is treated differently.
Annual turnover is calculated as all gross income earned from Businesses/Business Activities conducted in the UAE. Income is counted when it is recognized in financial statements and derived during the relevant tax period.
Revenue must be calculated using accounting standards accepted in the UAE. Default is accrual accounting; cash basis accounting may be used if your turnover doesn’t exceed AED 3 million in annual turnover.
Annual turnover does not include employment income (salary, benefits, allowances); personal investment income including bank interest and dividends from personal shareholdings; and any personal income not connected to the scope of the business operations (i.e. private pension, social security funds).
Annual turnover is measured over the Gregorian calendar year, not the entityās tax period. For reliefs, revenue may be assessed for the current and prior tax periods, as prescribed by Federal Decree Law No. 47
Sample Calculation for Freelancers:
For freelancers, annual turnover is the total amount billed or earned from freelance services during the year, before expenses, and excluding salary or personal investment income.
For example, a freelance graphic designer operates under a professional freelancers license in the UAE. During the tax year, they invoice clients for design services. Here are some examples of income covered under CT scope:
| Sample Income and Expense | Included? | Total |
|---|---|---|
| Client invoices for freelance work for clients A, B and C | āļø Included | Total invoices amount to AED 420,000 |
| One-off project outside normal scope(i.e. single advisory project completed once) | āļø Included | AED 70,000 |
| Reimbursed expenses from clients (i.e. travel reimbursement) | Treatment depends on accounting presentation: If recorded as gross income, it forms part of Revenue If recorded as pure reimbursement (agent/principal analysis), it may not For conservative purposes, include it unless clearly excluded in the financials | AED 25,000 |
| Online course sold once (i.e. Self-created online course sold during the year) | āļø Included | Gross receipts: AED 85,000 |
| Speaking engagement honorarium | If linked to professional activity ā include If purely incidental and not part of business ā may exclude | Paid AED 30,000 for a conference talk |
| Salary from employment | āļø Not included | AED 180,000 |
| Bank interest on personal savings | āļø Not included | AED 5,000 |
| Dividends from foreign shares (personal investment) | āļø Not included | AED 18,000 |
| TOTAL for annual turnover -> total for calculation of small business relief program | AED 630,000 |
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