UAE announces key tax rule update for residents
The United Arab Emirates (UAE) has unveiled a new ministerial decision aimed at clarifying the criteria for corporate tax liability within the country.
The announcement made earlier this week confirms that business owners in the UAE will only be obliged to pay corporate tax if their annual turnover exceeds AED 1 million ($272,000). In addition, the decision emphasises that income derived from real estate and personal investments will not be considered taxable.
The Ministry of Finance has introduced UAE Cabinet Decision No. (49) of 2023 to establish guidelines for resident and non-resident individuals engaged in business or business-related activities under the corporate tax law.
The primary objective of this decision is to provide clarity on the application of the corporate tax regime for individuals, ensuring that only business or business-related income is subject to taxation. At the same time, it specifies that personal income, including employment earnings, investments, and real estate (without licensing requirements), remains exempt from corporate tax.
To elaborate, individuals conducting business or business activities will only need to fulfil corporate tax obligations and registration requirements if their combined turnover exceeds AED 1 million in a calendar year. However, if the UAE resident also earns income from rental properties and personal investments, those revenue sources will not be liable for corporate tax as they fall under the out-of-scope categories.
The decision will particularly benefit small businesses and start-ups, offering them a favourable environment for growth.
“The new Cabinet Decision demonstrates the UAE’s commitment to maintaining a clear and competitive tax framework for both local and foreign individual investors,” explained Younis Haji Al Khouri, the Undersecretary of the Ministry of Finance of the decision.
Who added, “By simplifying the corporate tax system, the UAE continues to foster an attractive business environment that supports the growth of small businesses, start-ups, and the overall economy.”