Cabinet decision specifying business categories subject to Corporate Tax

The Cabinet of Ministers has issued Cabinet Decision No. 49 of 2023 effective from 1 June 2023, specifying the categories of Business or Business Activities^# conducted by a Resident/ Non-Resident Natural Person which will be subject to Corporate Tax in the UAE (’the CT Law’).

1. Who will be subject to Tax?

Business or Business Activity conducted by a Resident/ Non-Resident Natural Person if the total turnover from such activities exceeds AED 1,000,000 within a Gregorian calendar year (i.e. January to December)

Turnover has been defined to mean the gross amount of income derived during a Gregorian calendar year.

2. Specific exemption to income derived from certain activities

The Decision further specifies that activities that give rise to Turnover for a natural person from the following sources will not be considered as Businesses or Business Activities under Corporate Tax Regime regardless of the quantum of Turnover derived:

1. Wage - covers wage that is given to the employee in consideration of their services under the employment contract, whether in cash or in-kind including all allowances, and bonuses, any benefits provided for, in the employment contract or as per the applicable legislation in the State;
2. Personal investment income - Covers Investment activity that a natural person conducts for their personal account that is not conducted through or requires a License from a Licensing Authority in the State, nor considered as a commercial business under Federal Decree Law 50 of 2022;
3. Real Estate investment income - Covers any activity conducted by a natural person related to, directly or indirectly, the sale, leasing, sub-leasing, and renting of land, or real estate property in the State that is not conducted through or requires a License from a Licensing Authority in the State.

The Minister of Finance may issue necessary further decisions for the implementation of the above.

Registration Requirement

Natural persons who are not subject to tax as per the above-mentioned regulations do not need to apply for Corporate Tax Registration.

MBG View

The subject Cabinet Decision provides much-anticipated relief to natural persons for incomes such as wages, personal investment income, and real estate income (without licensing requirements) from taxability under the corporate tax regime. However, it would be crucial to evaluate whether the activity undertaken by a natural person requires a license from a licensing authority in the UAE or not. In case an activity requires a license to conduct the said activity, the income from such activity would be subject to tax if the aggregate turnover exceeds AED 1 Million.

Stay tuned for more insights on provisions of UAE Corporate Tax Law. For any assistance, you may reach out to us by emailing us at uae@mbgcorp.com