Corporate Tax (CT) Guide on Taxation of Natural Persons in the UAE
December 19, 2023

This Guide only addresses the tax implications for the natural persons under the UAE CT Law i.e. without considering the potential implications of Double Taxation Avoidance Agreement entered between UAE and Foreign Country for determining taxability of Natural Person who is Non-Resident in UAE).
The term natural person takes its ordinary meaning, and refers to a living human person of any age, whether resident in the UAE or elsewhere.
Key Considerations when determining whether a natural person will be subject to CT.
- A natural person who conducts a Business[1] or Business Activity[2] in the UAE is considered to be a Taxable Person, and a Resident Person as defined in Article 11(3) of the CT Law.
- A natural person is subject to CT on their Business or Business Activities only where the total Turnover derived from Business or Business Activities conducted in the UAE exceeds AED 1 million within a Gregorian calendar year (i.e. January to December).
- Income from the following categories is not considered as arising from a Business or Business Activities, and is disregarded when determining Turnover and not subject to CT, regardless of the amount:
- 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;
- 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.
- 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.
- Resident & Non- Resident When a natural person resides in the UAE and they conduct Business or Business Activities in the UAE, they are considered to be a Resident Person and, therefore, a Taxable Person for CT purposes.
- When a natural person resides outside the UAE – for instance, having their home in another country – they become a Resident Person for CT purposes if they conduct Business or Business Activities in the UAE.
- Income Income derived from Business or Business Activities conducted in the UAE by a natural person is subject to CT. However, if a natural person’s total Turnover from Business or Business Activities conducted in the UAE does not exceed AED 1 million within a Gregorian calendar year, they do not have to register for or pay CT on their income from the Business or Business Activities. The Turnover may include “in-kind” payments which are valued at Market Value.
- Business and Business activities Business Activity includes any transaction or activity, or series of transactions or activities, conducted by a Person in the course of its Business.
- Example of activities conducted by natural person that are not typically considered as Business or Business Activities are:
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- lottery winnings;
- game show prizes
- Natural Person deriving state sourced income are subject to CT. Income generally considered to be state source if the income is earned from a Resident person or is derived from activities or assets located in the UAE.
- Computation of turnover - Gross income derived during a Gregorian calendar year from all the categories of Businesses or Business Activities that they conduct should be taken into consideration. Turnover should be measured on an accrual basis of accounting except where the natural person applies the Cash Basis of Accounting.
- Small Business relief Article 21 allows a resident person to elect for small business relief. To qualify for the small business relief, the relevant conditions need to be satisfied, the Revenue from the taxable Business or Business Activities of the natural person in the relevant Tax Period and previous Tax Periods does not exceed AED 3 million for each Tax Period.
- Non-deductible expenditure rules and natural persons The guide has clarified that amount withdrawn by natural person from their sole proprietorship business in the form of salary/ wage is disallowed while calculating the Taxable Income arising from that business. Illustration provided in the guide is reproduced below:
- “A natural person, Mr. T conducts a Business through a sole proprietorship in the UAE. Mr. T has registered for Corporate Tax with the FTA after meeting the required conditions.
- For the Tax Period ended 31 December 2025, Mr. T withdrew AED 200,000 from the business and recorded this in his Business accounts as an annual salary cost on the basis that Mr. T is operating the Business.
- Since Mr. T is running a sole proprietorship Business, no deduction is allowed for the AED 200,000, as Mr. T and the Business are one and the same Taxable Person even if the salary would have been an arm’s length salary.”
- General Calculations for Natural persons
- General Interest deduction limitation rule is not applicable to natural persons.
- Expenditure incurred by a natural person wholly and exclusively for the purposes of his or her Business that is not capital in nature shall be deductible in the Tax Period in which it is incurred.
- Article 33 of the CT Law disallows a specific expenditure – Drawings or other amounts taken from the business for personal use.
- Compliances for natural persons
- Tax Registration - required to register for CT purposes once the total Turnover derived from such Businesses or Business Activities exceeds AED 1 million within a Gregorian calendar year. Same Tax Registration Number will be used for all the different types of business or business activities being conducted by the Natural Person.
- Tax Deregistration - required to deregister in case of cessation of Business or Business Activities whether by dissolution, liquidation, or otherwise. The application shall be filed within 3 months of the date of cessation of the Business or Business Activities. Further, If the natural person has more than one Business or Business Activities, then the natural person should deregister only when all Business or Business Activities has ceased.
- Death of the taxable person Before estate distribution -settlement shall be made from the value of the elements of the estate or income.After estate distribution - recourse shall be made against the heirs and legatees for settlement of such outstanding tax each to the extent of their share in the estate.
- Tax Period The natural person need to register for CT purposes and their first Tax Period would be the Gregorian calendar year commencing on 1 January 2024 and ending on 31 December 2024.
- Accounting standards & Financial statements Prepare standalone Financial Statements in accordance with International Financial Reporting Standards (“IFRS”). When the turnover does not exceed AED 50 million, they can apply the IFRS for SMEs’ and where the turnover exceed the said threshold there is requirement to apply IFRS for Non- SMEs.When the turnover exceeds AED 50 million, the taxable person must compulsorily prepare and maintain audited financial statement.Further, they may prepare Financial Statements using the Cash Basis of Accounting if their Turnover does not exceed AED 3 million.
- Tax return A natural person that is a taxable person must file a CT return to the FTA not later than 9 months from the end of the relevant tax period.
[1] Business: Any activity conducted regularly, on an ongoing and independent basis by any Person and in any location, such as industrial, commercial, agricultural, vocational, professional, service or excavation activities or any other activity related to the use of tangible or intangible properties.
[2] Business Activity: Any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of its Business.
Key TakeawayIt is note worthy that income being derived from activities of ‘Real estate Investment’ will not be considered for computation of turnover of AED 1 million and not subject to corporate tax as long as these activities is not conducted through or requires a License from a Licensing Authority in the State.
It therefore implies that the onus shall be on Natural Person to substantiate as to whether conducting of such activities requires license from Licensing Authority or not.