Do Individuals in the UAE Need to Pay Corporate Tax?

June 28, 2025

Modern illustration showing an individual with a document labeled individuals and a corporate tax folder with a question mark, focused on UAE corporate tax for individuals.

Does the Corporate Tax Law Apply to Individuals?

Yes, it does. Many people still think Corporate Tax only targets big companies or formal businesses. But individuals who earn business income can also fall under the UAE Corporate Tax law.

The law, introduced under Federal Decree Law No. 47 of 2022, applies to natural persons who run a business and cross a set revenue threshold.

This includes freelancers, single-license holders, and even those renting out commercial property on a regular basis. It also affects independent contractors, part-time side hustlers, and online creators making revenue through services or digital sales. With more people monetising their skills and platforms, this rule reaches further than many expect.

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Who Counts as a "Natural Person"?

The term "natural person" refers to individuals who run a business under their own name without setting up a company. These include:

Freelancers like writers, designers, marketers, or consultants

Self-employed coaches, trainers, or service providers

Trade license holders with no company setup

Independent sellers or e-commerce store operators

Landlords running rental activities that are treated as business income

Creators offering paid content, courses, or digital tools

People providing hands-on services like photography, repairs, or event planning

This group does not include employees or those earning passive investment income. The key difference is whether you are actively running a business and generating regular revenue.

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When Does the Tax Apply?

You must register and may need to pay Corporate Tax if both of these apply:

You are running a business in the UAE

Your gross annual revenue from that business is more than AED 1 million

This threshold is based on total revenue before expenses. If your revenue is AED 1.05 million but your profit is only AED 100,000, you still need to register. It’s not about how much you keep, it’s about how much your business makes in total.

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Which Types of Income Are Taxed?

If you are a natural person and your income comes from business activity, then it could be taxable. This includes:

Payments from freelance work

Sole trader earnings

Income from selling goods or services

Commission-based income

Advisory, coaching, or consulting fees

Monetised digital content, e-books, or courses

Business operations under a professional or trade license

Income becomes taxable when it consistently exceeds the AED 1 million revenue limit. Once that happens, your first AED 375,000 in taxable income is exempt. The remaining balance is taxed at 9 percent.

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What Income Is Not Taxable?

Not all income is covered by Corporate Tax. You do not need to register or pay tax if your income comes solely from:

A salaried job or employment

Bank interest from savings accounts

Dividends or capital gains on personal investments

Rental income from residential property not treated as a business

Income received casually that doesn’t qualify as a regular business

So, if you earn money from personal sources with no business-like pattern, the tax rules don’t apply. The law focuses on consistent, profit-seeking activity.

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What Happens After You Cross AED 1 Million?

If your total gross revenue from business activity goes over AED 1 million in a tax year, then:

You must register with the Federal Tax Authority (FTA)

You will be issued a Corporate Tax Registration Number

You are expected to prepare financial statements

You must file your annual Corporate Tax return

You must keep your records for at least 7 years

Tax is charged as follows:

0 percent on the first AED 375,000 in profit

9 percent on the remaining profit

This system is straightforward but only if you stay on top of your accounting. Ignoring this rule can lead to fines of AED 10,000 for late registration, even if you owe no tax.

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Can You Apply for Small Business Relief?

Yes, if you qualify. Small Business Relief is a useful option if you:

Are a UAE tax resident

Have business revenue of AED 3 million or less

Are not part of a multinational group

Are not receiving zero percent tax through Free Zone benefits

With Small Business Relief, your taxable income is considered zero for the year. But you still need to file a return to show you qualify. This option runs from 1 June 2023 until 31 December 2026, unless extended.

It’s ideal for small, early-stage operations that are growing but not yet earning significant profit.

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Do You Need to Keep Accounting Records?

Yes. Good bookkeeping is essential. Even if you’re a one-person business, you’re expected to:

Track revenue and expenses

Use accrual accounting (report income when earned, not when received)

Prepare yearly financial statements

Keep invoices, contracts, and receipts for at least 7 years

In rare cases, you can apply to use cash accounting. This is only allowed for very small businesses and must be approved by the FTA.

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Scenario Examples

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Example 1: Freelancer‍

Rami is a freelance social media manager earning AED 1.3 million per year. His work is done under a freelancer permit. He must register and file for Corporate Tax.

Example 2: Investor‍

Layla earns AED 900,000 a year from dividends, capital gains, and passive investing. She doesn’t provide services or run a business. She doesn’t need to register.

Example 3: Small Online Store‍

Adnan runs an online shop selling handmade products. His revenue reached AED 1.2 million last year. He must register with the FTA and start filing Corporate Tax returns.

Example 4: Mixed Income‍

Zahra earns AED 950,000 from freelance work and AED 100,000 from a part-time job. Her total freelance revenue is under AED 1 million, so she doesn’t need to register yet. But she should track her income closely.

Example 5: Growth Year‍

Ahmed started selling online courses and crossed AED 1.1 million this year after going viral. He didn’t expect it, but now he must register and file Corporate Tax even if his profit margin is slim.

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Are There Any Exemptions?

Yes. You do not need to register or pay Corporate Tax if:

Your total business revenue is under AED 1 million per year

You only earn from passive or personal income sources

You qualify for Small Business Relief and elect it in your return

Once your business income grows past AED 1 million, registration is no longer optional.

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What Should You Do Now?

Here’s a quick to-do list:

Review your revenue over the past 12 months

Identify if your income is from business activity

File your return on time

Stay on top of your bookkeeping

Waiting can cost you. Fines and compliance issues can pile up. Even if you think your income doesn’t count as business income, it’s worth double-checking.

Tax Star simplifies everything. It helps you track income, flag when thresholds are crossed, and manage the process step by step.

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