Essential Tax Information for Natural Persons Under UAE Corporate Tax: What Entities Need to Know

All the business entities operating in the UAE, along with the entities planning to start a business in the UAE, must be aware of the basic tax demography of the land. The introduction of the UAE CT law has made the tax framework of the land more complex. It is mandatory for the businesses to ensure that they comply with the tax laws and thereby avoid any circumstances of penalties or fines. Irrespective of the nature and size of the business, the entities must be aware of the basic tax information. In this blog, we have included the basic tax information related to the natural persons under the UAE corporate tax law.

Natural Person Under UAE Corporate Tax

Under the UAE corporate tax law, a natural person is considered to be the one who is conducting any business or business activity in the UAE or any entity who has any permanent establishment in the UAE or derives any state-sourced income.

Implication of the CT on the Income or Turnover of Natural Persons

The income that is derived from the business or business activities that are being conducted in the UAE would be subject to CT. The turnover from business or business activities being more than 1 million AED will attract CT. If such turnover earned from the business activities is less than the said threshold, then the natural person is not required to get registered under the CT or pay any tax returns within the relevant Gregorian calendar.

Any income that is earned from other activities, such as personal investments, real estate investments, or any employment income, will not be subject to CT and would not be included in the calculation of the AED 1 million turnover.

You can also read: Is a Natural Person Eligible for the Application of the Small Business Relief?

Tax Period for Natural Persons

The Gregorian calendar is considered to be the tax period for the natural persons, which starts from 1st January and goes till 31st December.

CT Registration for Natural Persons

The natural persons engaged in the conducting of the business or business activities must mandatorily register under the CT if the turnover from such business or business activities exceeds the threshold of AED 1 million within the respective Gregorian calendar.

If the turnover of the business or the business activities conducted in the current Gregorian calendar, say 2024, exceeds the said threshold, then the registration under the CT must be done before the 31st of March of the subsequent or next Gregorian calendar, i.e., 2025. The failure to do so would attract a penalty of AED 10,000.

CT Deregistration for Natural Persons

If under any circumstances the business or the business activities of the natural persons have resulted in any dissolution, liquidation, or cessation of operation due to any such circumstances, then the application for the deregistration must be made within 3 months of such liquidation, dissolution, or cessation. 

Requirements Related to Financial Statements for Natural Persons

The taxable natural persons are instructed to maintain the financial statements of the business or the business activity as per the accrual basis; if the turnover is less than AED 3 million, then they can maintain the statements on a cash basis and in certain situations where the FTA has approved doing so.

The financial statements are to be prepared as per the IFRS standards; if the turnover is less than AED 50 million, then the IFRS standards for the SMEs must be used. If the threshold exceeds, the financial statements are to be audited.

The financial statements are to be maintained for at least a period of 7 years from the end of the relevant tax period.

Time Period for Natural Persons to File the Tax Returns

CT returns must be filed within 9 months from the end of the relevant tax period.

Navigate Through Tax Requirements of UAE with CDA

CDA, being one of the leading accounting and auditing firms in UAE, has a team of well-equipped tax experts who are always ready to lend their expertise in providing assistance regarding the tax requirements of the UAE. The experts at CDA are well aware of the CT, VAT, and excise tax regimes, along with other international tax frameworks, which allow you to minimise the tax liability and get ahead of the competitors.

To explore more about the tax consultancy services, connect to our professionals now.