A Guide to Corporate Tax Registration for UAE Consultants, Freelancers, and Influencers.
The UAE has implemented a corporate tax regime, and individuals earning over AED 1 million annually from providing consultancy or other commercial services in UAE are now required to register for corporate tax. This applies not only to consultants but also to social media influencers, freelancers, and even retired individuals who are still doing consultancy work.
The Federal Tax Authority (FTA) recently updated its detailed guide on when individuals need to register for corporate tax and how to do so. In a nutshell, if your individual business earns more than AED 1 million annually, you need to register for corporate tax.
For example, if a freelance consultant earns more than AED 1 million in a year, that income is considered a “business activity” carried out in the UAE and is subject to corporate tax. However, the good news is that the first AED 375,000 of income is subject to a 0% tax rate, and only the remaining amount is taxed at 9%.
How to determine if your activity is considered “business activity”:
- Is the person producing or selling goods/services based in, working in, or residing in the UAE?
- Is the signing of contracts or the development of business taking place in the UAE?
- Are the assets used to produce the goods/services located in the UAE?
If your activity meets these criteria and your annual income exceeds AED 1 million, you need to register for corporate tax and obtain a tax registration number as soon as possible!
TXTK‘s Consultant advice:
Take advantage of the Small Business Relief Scheme!
If you are a small business with an annual income of less than AED 3 million and have not previously exceeded this threshold, you may consider applying for the Small Business Relief Scheme. Eligible individuals can apply for this scheme and enjoy certain tax breaks.
What income is exempt from corporate tax?
The FTA has clarified that personal salaries, real estate investments, and income from personal investments are not subject to corporate tax.
Who needs to pay corporate tax?
- “Natural persons” residing in the UAE with an annual income exceeding AED 1 million, i.e., you and me;
- Even salaried employees who do business on a part-time basis need to pay corporate tax if their income exceeds AED 1 million;
- Influencers and small business owners also need to keep proper records of their income to calculate their tax liability.
Who does not need to register for corporate tax?
The FTA states that if your individual business’s annual income does not exceed AED 1 million, you do not need to register for corporate tax. However, it is important to note that this income also includes “in-kind” income, such as when influencers receive hotel accommodation in exchange for traffic.
Attention, sole proprietors and partners!
This is TXTK reminding you that your personal income needs to be included in the corporate tax calculation, as you and your business are considered a single entity. For partnerships, each partner is responsible for their own corporate tax payment but can apply to the FTA to be taxed as a single entity. The UAE corporate tax is now in effect, so get prepared, consult professionals, and thoroughly understand the relevant regulations to avoid any unnecessary complications!
