Introduction
The introduction of Corporate Income Tax (CIT) in the UAE represents a crucial shift for businesses and individuals operating in the region. For natural persons (individuals), understanding the intricacies of CIT is essential to ensure compliance and optimize financial outcomes. At Limrise, we specialize in guiding individuals through the complexities of CIT, offering expert support tailored to your unique needs.
Who Should Read This Information?
This guide is designed for natural persons who need clarity on:
- When natural persons are subject to UAE Corporate Tax.
- Which incomes are taxable under Corporate Tax.
- The applicable Corporate Tax rates.
- The Tax Period under the Corporate Tax Law.
- Registration and compliance requirements for natural persons.
When Are Natural Persons Subject to UAE Corporate Tax?
Natural persons become subject to UAE Corporate Tax under the following conditions:
- Conducting a business or business activity in the UAE.
- Having a permanent establishment in the UAE.
- Deriving state-sourced income from the UAE.
Corporate Tax applies only if the total turnover from their business or business activities exceeds AED 1 million within a Gregorian calendar year starting from January 1, 2024. If the turnover is below this threshold, no Corporate Tax is required.
Note: Wage income, personal investment income, and real estate investment income are not subject to Corporate Tax and do not count towards the AED 1 million turnover threshold.
What Incomes Are Subject to Corporate Tax?
Corporate Tax applies exclusively to income derived from business or business activities in the UAE. The following categories are exempt:
- Wages: Employment income, including salaries and other compensation.
- Personal Investment Income: Dividends, interest, and gains from personal investments not conducted through a business license.
- Real Estate Investment Income: Income from the sale, lease, or rental of real estate not requiring a business license.
Corporate Tax Rates for Natural Persons
For natural persons, the Corporate Tax rates are:
- 0% on taxable income up to AED 375,000.
- 9% on taxable income exceeding AED 375,000.
Tax Period for Natural Persons
The Tax Period for natural persons is the Gregorian calendar year, from January 1 to December 31. The first Tax Period under the new regime will be the 2024 calendar year.
When Must a Natural Person Register for Corporate Tax?
Registration is required if the turnover from business or business activities exceeds AED 1 million in a Gregorian calendar year. Registration must be completed by March 31 of the subsequent year. For example, if turnover exceeds AED 1 million in 2024, registration is due by March 31, 2025.
Failure to register on time incurs a penalty of AED 10,000.
What If Turnover Falls Below AED 1 Million in Subsequent Years?
If a natural person’s registered turnover falls below AED 1 million in a subsequent year, they must continue filing a ‘nil’ Tax Return but are not required to deregister unless all business or business activities have ceased.
Deregistration for Corporate Tax
Deregistration must be applied for if all business or business activities cease. The application should be submitted within three months of cessation.
Financial Statements Requirements
Natural persons must prepare financial statements based on the Accrual Basis of Accounting, though the Cash Basis is allowed if turnover is below AED 3 million. Financial statements should adhere to International Financial Reporting Standards (IFRS), or IFRS for SMEs for turnover below AED 50 million. If turnover exceeds AED 50 million, audited statements are required. All records must be kept for seven years.
Filing a Tax Return
Corporate Tax Returns must be filed within nine months after the end of the Tax Period. A single return should cover all business and business activities subject to Corporate Tax.
Why Choose Limrise for Your CIT Needs?
Navigating the new CIT regulations can be complex and challenging. At Limrise, we offer:
- Expert Guidance: Our team is proficient in UAE CIT regulations, providing clear and actionable advice.
- Comprehensive CIT Services: From registration to filing returns, we handle every aspect of CIT compliance.
- Proactive Planning: We help you strategize to minimize your tax liabilities and optimize financial performance.
- Personalized Solutions: Tailored services to fit your specific needs, whether you’re a small business owner or an individual entrepreneur.
- Client-Centric Approach: We prioritize your needs, ensuring timely and transparent communication.
Conclusion
Understanding and complying with Corporate Income Tax is essential for all natural persons in the UAE. Limrise is here to simplify this process, offering expert support to ensure you meet your tax obligations effectively. Choose Limrise to navigate the complexities of CIT with confidence and ease.
Contact Us Today!
📞 +971 50 786 2491 | +971 55 285 2393
✉️ hello@limrise.com
