UAE Corporate Tax – Read This if You’re a Small Business Owner!

Will individuals or natural persons be subject to UAE Corporate Tax?

The UAE Corporate Tax will be implemented without a parallel tax on the income of natural persons, namely individuals. In order to level the playing field between incorporated businesses and unincorporated businesses owned by individuals, UAE Corporate Tax will also apply to natural persons engaged in a business or commercial activity in the UAE.

This will include sole establishments or proprietorships and individual partners in an unincorporated partnership that conducts business in the UAE. Similar approaches are taken in other jurisdictions without parallel taxes on personal income from a business.

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Whether an individual is engaged in a business that is subject to UAE Corporate Tax would generally depend on whether the activity requires the individual to obtain a commercial license or equivalent permit from the relevant competent authority (e.g., the relevant Department of Economic Development or registration authority of a Free Zone) in the UAE.

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Salaries and other employment income whether received from the public or private sector and other personal income earned by UAE and foreign individuals such as dividends, rental receipts from UAE real estate investments, and other investment income will not be within the scope of the proposed UAE Corporate Tax regime. The same treatment is intended to apply where UAE real estate and other investments are held through a private or family trust on behalf of beneficiaries that are natural persons.

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Note: The information in this article is meant to provide an initial introduction to the proposed UAE Corporate Tax regime and not be used for individual or business decisions as it does not represent the final legislation by the Government. More information o the UAE Corporate Tax regime will be made available in due course.