Introduction
HSBM Global is committed to keeping you abreast of the latest legislative changes that could impact you or your business. Today, we provide an overview of the UAE Cabinet Decision No. 49 of 2023 ("Decision") issued pursuant to the Federal Decree-Law No. 50 of 2022 ("CT Law"). This key piece of legislation outlines the categories of businesses or business activities conducted by a resident or non-resident natural person that are subject to corporate tax.
Key Considerations
The Decision provides clear definitions for terms such as "Wage", "Personal Investment", and "Real Estate Investment". These definitions help distinguish between different types of income and activities, which is crucial for determining tax liability.
As per the Decision, businesses or business activities conducted by a resident or non-resident natural person will only be subject to corporate tax if the total turnover derived from such businesses or business activities exceeds AED 1 million within a calendar year.
Exemptions
The Decision states that activities generating revenue from the following activities are not considered as businesses or business activities subject to Corporate Tax, regardless of the amount of turnover:
- Wage: Any income that an employee receives for their services under an employment contract. It includes any allowances, bonuses, or other benefits provided in the employment contract or in accordance with UAE legislation.
- Personal investment income: income from an investment activity conducted by a natural person for their own account, which does not require a license from a licensing authority in the UAE and is not considered a commercial business under the CT Law.
- Real estate investment income: income from the sale, leasing, sub-leasing, and renting of land or real estate property in the UAE whether conducted, directly or indirectly, by a natural person for their own account, which does not require a license from a licensing authority in the UAE.
If a natural person is not conducting a business or business activities subject to Corporate Tax as per this decision, they are not required to register for corporate tax.
Implications for Businesses and Individuals
These changes have a direct impact on how individuals and businesses operate within the UAE. Understanding these changes is critical to maintain compliance and optimize your tax position. If you exceed the stated revenue threshold, or if you own real estate under legal entity, you'll need to ensure that you're registered for Corporate Tax and that you understand how to accurately report your income.
Conclusion
Navigating the intricate world of taxation can be challenging, but keeping up with legislative changes is essential. The Cabinet Decision No. 49 of 2023 introduces key changes to the taxation of businesses and business activities conducted by natural persons in the UAE. As these changes take effect, individuals and businesses must adapt accordingly.
At HSBM Global, we are here to help. Our expert team can provide detailed advice and support on all aspects of corporate taxation, ensuring your business remains compliant while optimizing your tax strategy. For further clarification on this or any other tax-related inquiries, please reach out to us at tax@hsbmglobal.com.
Stay informed, stay compliant!