Ministry clarifies UAE corporate tax rule for individuals

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The UAE's Ministry of Finance has clarified that individuals conducting business activities will be subject to corporate tax only if their combined turnover exceeds AED 1 million in a calendar year.

It added that personal income from employment, investments or real estate (without licensing requirements) will not be taxed.

For example, if a UAE resident operates an online business and the combined annual turnover from this business exceeds AED 1 million, under the new decision, the income from the online business 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 tax as they fall under the out-of-scope categories.

The UAE Cabinet Decision No. (49) of 2023 spells out the treatment of resident and non-resident individuals undertaking a business or business activity, for Corporate Tax Law purposes.

"The new Cabinet Decision demonstrates the UAE's commitment to maintaining a clear and competitive tax framework for both local and foreign individual investors," said Younis Haji Al Khouri, Undersecretary of the Ministry of Finance.

"By simplifying the Corporate Tax system, the UAE continues to foster an attractive business environment that supports the growth of small businesses, startups, and the overall economy," he added.

The ministry's clarification comes ahead of the official rollout of corporate tax in the UAE from June 1.

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