The UAE’s approach to taxing natural persons has been outlined in Cabinet Decision No. 49 of 2023, which governs the application of Corporate Tax Law to individual incomes. Here’s a breakdown of the key points:

Scope of Taxation for Natural Persons:

Natural persons engaged in business or business activities in the UAE are subject to Corporate Tax Law if their gross turnover exceeds AED 1 million within a calendar year.

Compliance Requirements:

• Individuals meeting the above criteria must register with the Federal Tax Authority (FTA) and obtain a Corporate Tax Registration Number.
• They are required to file a Corporate Tax Return within nine months following the end of their financial year.
• A Corporate Tax rate of 9% is applicable on profits earned from business activities exceeding AED 375,000 in a financial year.

Whether all the Income of Natural Persons will be subject to Corporate Tax?

No. Not all income earned by natural persons is subject to Corporate Tax. Specifically excluded are:

Wages:

Remuneration from employment, including allowances, bonuses, and other benefits, as per the employment contract or applicable legislation.

Personal Investment Income:

Investment activity that a natural person conducts for their personal account that is neither conducted through a License or requiring a License from a Licensing Authority in the State, nor considered as a commercial business in accordance with the Federal Decree-Law No. 50 of 2022.

Real Estate Investment Income:

Income from activities related to sale, leasing, or renting of land or property, where such activities do not require a license from a Licensing Authority.

In summary, while the UAE’s Corporate Tax Law brings certain incomes of natural persons within the ambit of taxation, it is important to note the exclusions and compliance requirements. This framework aims to maintain financial integrity and compliance, balancing the need for taxation with the recognition of personal and investment incomes.