UAE has presented wide-ranging protocols governing the taxation of natural persons under the Corporate Tax Law. As per Clause 6 Article 11 of the Corporate Tax Law, a taxable person that subject to UAE corporate tax are also categorized into “Juridical persons and Natural persons”. Natural persons refer to any entity that includes individuals represented by legal legislatures. The law applies to natural persons involved in business activities in the UAE with a permanent establishment or generating UAE-sourced income. Here are all the important points of corporate tax law that Natural Persons Need to Know;
Citizenship of a natural person
A very important and obvious question that may arise in the minds of businesses would be what if the natural person is not an Emirati or Resident. It is fundamental to note that a natural person have to pay corporate taxes if their business’s yearly turnover surpasses the threshold of 1 million AED for businesses working in the UAE. The citizenship status of the person does not impact. As per to the UAE corporate law, natural persons have to pay corporate taxes for business income produced outside the UAE, if the revenue is from a business or business-related action directed inside the UAE.
Rental income of natural persons
When a natural person keeps more than a single commercial property in their tag, and when the annual cumulative rental revenue from these properties surpasses AED 1 million, this will be exempted from taxable income under the UAE Corporate Tax Law. It is important to note that omissions are only conceivable if such a business or business activity is not essential to be led through a license issued by a UAE’s legal licensing authority.
Small Business Relief
Natural persons have option to claim a full tax exemption as per the small business relief program. There are some obligations that a business has to satisfy to be eligible as per this program. If the business of natural person’s revenue is less that AED 3 million, they can claim tax exemption under small business relief. Filing tax returns means finding if your business falls to tax and then cautiously organizing your income sources.
Deduction Rules and Related Parties
Natural persons are also permitted full deductions for interest outlay if it is experienced solely and wholly for their business that obeys to the arm’s length principle. Transactions with linked parties must also obey this principle, including holders, directors, officers, and associates in an Independent Partnership.
Tax Registration and Deregistration
Natural persons have to register for tax if their turnover surpasses AED 1 million within a calendar year. The conditions of tax deregistration include the termination of all business activities, filing within 3 months of termination, and compliance with filing and payment obligations.
Owning Shares in a Corporation
Natural persons can be impacted by owning shares in a corporation through dividends and capital gains.
- Dividends are typically levied as income.
- Capital gains tax applies to the profit generated from selling shares.
Shareholders have to report these incomes on their tax returns, by obeying to specific protocols and deadlines. Also, having weighty shares might involve extra reporting obligations and potential influence over corporate decisions. Accurate record-keeping and responsiveness of tax obligations are important to dodge consequences and enhance tax benefits related with share ownership.
Conclusion
If you fall in the category of a natural person, you must be aware about all the important facts related to corporate tax in the UAE. Some complications may occur due to competitive landscape of UAE, it is recommended to get guidance from top corporate consultants in the UAE such as Corporate Tax UAE Their proficient team is well-capable to handle issues and problems related to corporate domain. To navigate the problems related to the natural persons, Farahat & Co. can lead you to resolve issues so you can easily address the issues.