The legal foundation for levying federal taxes on corporate profits in the United Arab Emirates is established by Federal Decree-Law No. 47/2022 on the Taxation of Corporations and Businesses, also known as the Corporate Tax Law. The purpose of this blog is to give a general overview of the Corporate Tax Law’s consequences for natural people, highlighting important factors, exclusions, and the overall tax environment.
A thorough guide explaining how corporate tax applies to natural persons, registration requirements, and other steps required to comply with UAE Corporate Tax Law has been published by the Federal Tax Authority (FTA) in relation to the corporate tax guidance CTGRNP1: UAE corporate tax registration of natural persons.
Natural and Jurisdictional Persons
As per the FTA’s guide CTGRNP1, taxable individuals fall into two groups under the Corporate Tax Law: natural and jurisdictional persons. Legal persons are entities that are recognized by international or UAE laws and have a separate legal status from their founders. Living individuals are referred to as “natural persons,” and if they are conducting business in the United Arab Emirates, they can be further divided into residents and non-residents based only on the nature of their enterprise, which is separate from their personal identity.
Tax Residency Requirements
A crucial component of the tax system is residency. A tax resident is someone who lives or works in the United Arab Emirates. Unless a double tax treaty applies, an individual with a business in the UAE may be considered a tax resident even though they do not reside there. For UAE tax reasons, the double tax treaty may cause non-residency.
Natural persons Mandatory Registration
Natural people operating in the United Arab Emirates who generate more than AED 1 million in gross revenue annually are obliged for corporate tax registration UAE. According to the corporate tax advice CTGRNP1, registering entails completing corporate tax reports and approving tax payments.
Evaluation of Revenue
Unless a cash basis is used, the evaluation of total revenue is based on the accumulation basis of accounting. The legal representatives of minors or the incapacitated handle their tax obligations. For natural individuals, the tax year runs from January 1st to December 31st in accordance with the Gregorian calendar.
Taxation of International Income
Natural individuals who reside in the United Arab Emirates are obligated to pay tax on any overseas income they receive from doing business there. On the other hand, non-residents must pay tax on the income connected to their UAE permanent establishment.
Determining Business Activity
In the United Arab Emirates, several criteria influence whether revenue is related to business activities. These consist of the addresses and places of residence of the persons engaged, the management of contracts or business expansion from the United Arab Emirates, and the placement of resources that support the creation of goods or rendering of services.
Considerations for Deregistration
If all business operations are terminated, deregistration for corporate taxes is only necessary. It is not possible for current registrants to file for tax deregistration if they carry on with their business operations, even if their annual revenue is less than AED 1 million. After the firm has stopped, the application may be submitted within three months.
Procedure for Natural Persons to Register
To register, a natural person must use the EmaraTax portal to apply. While new registrants must create credentials, current VAT or excise tax registrants may use existing login information. The FTA reviews the application and any supporting materials, and if it is approved, a Tax Registration Number is provided.
Conclusion
In conclusion, natural people should carefully consider how they fit into the framework of the Corporate Tax Law. You can hire Dubai corporate tax consultants and make use of their specific corporate tax services UAE for your taxation process. ebs Chartered Accountants are the best choice for this purpose in Dubai. Ensure reporting, registration, and payment requirements are met. The company tax environment in the United Arab Emirates can only be successfully navigated by keeping up with legal requirements and staying educated. For further information on corporate tax Dubai, you can look at the insights on uaetaxgpt.ae.
FAQs
How are natural persons taxed under the UAE corporate tax law?
A natural person is subject to Corporate Tax on their Business or Business Activity only where the total turnover derived from the Business or Business Activities conducted in the UAE exceeds AED 1 million within a Gregorian calendar year.
Is corporate tax registration mandatory in UAE?
UAE businesses subject to corporate tax are required to register and obtain a tax registration number. Generally, the registration application must be submitted to the Federal Tax Authority.
Who is exempt from UAE corporate tax?
Government entities and government-controlled entities to be specified in a cabinet decision. Exempt upon notification to the UAE Ministry of Finance – extractive and non-extractive natural resource businesses.
