A UAE resident individual operates a licensed, unincorporated freelance consulting business. During a Gregorian calendar year, the business generates AED 1.2 million in turnover, and the individual separately earns a salary from full-time employment. Under UAE Corporate Tax Law (Cabinet Decision No. 49 of 2023), which amount determines whether this individual is a Corporate Tax Taxable Person?
- Only the AED 1.2 million business turnover, since the AED 1,000,000 threshold is measured on licensed business or business activity turnover, and employment income is excluded from scope
- The combined total of the AED 1.2 million business turnover and the salary, because all of an individual's income counts toward the threshold
- Only the salary income, because Corporate Tax targets employment income earned above AED 1,000,000
- Neither amount, because natural persons can never be Corporate Tax Taxable Persons under UAE law
Why A? And why not the others?
Correct answer: A. Only the AED 1.2 million business turnover, since the AED 1,000,000 threshold is measured on licensed business or business activity turnover, and employment income is excluded from scope
Cabinet Decision No. 49 of 2023 provides that a natural person conducting business or business activity in the UAE is only subject to Corporate Tax where the total turnover from that business or business activity exceeds AED 1,000,000 within a Gregorian calendar year, and it explicitly excludes employment income, personal investment income, and real estate investment income (where no licence is required) from that turnover calculation. Here the AED 1.2 million licensed consulting turnover alone exceeds the threshold, bringing the individual into scope. Option B is wrong because it wrongly folds excluded employment income into the turnover test. Option C is wrong because employment income is expressly carved out of Corporate Tax scope for natural persons and is never the basis for the threshold. Option D is wrong because natural persons conducting a business or business activity above the AED 1,000,000 turnover threshold are explicitly brought into scope as Taxable Persons.
Source: UAE Cabinet Decision No. 49 of 2023 (Taxation of Natural Persons under Corporate Tax Law)