Resident natural persons

Residence for Corporate Tax purposes is not determined by where a natural person resides or is domiciled. For natural persons, residence for Corporate Tax purposes is concerned with the person’s business connection to the UAE. It is this connection, rather than other factors such as nationality or where a person is physically present, that gives the UAE the powers to levy Corporate Tax on an individual’s Business or Business Activity.

This approach means, for example, that natural persons conducting Businesses or Business Activities in the UAE are Resident Persons for Corporate Tax irrespective of their nationality, whether they hold a residency visa in the UAE, whether their income is sourced in the UAE or from abroad, or how much time they may physically spend in the UAE.

Specifically, Corporate Tax only applies to natural persons who are engaged in Businesses or Business Activities in the UAE and earn Turnover from these Businesses or Business Activities in excess of AED 1,000,000 in a Gregorian calendar year.14 This includes sole establishments and individual partners in Unincorporated Partnerships that conduct a Business or Business Activity in the UAE (see Section 8.2.1). A sole establishment is a trading Business owned by a natural person, where the proprietor is not separate from the Business. This is because of the direct relationship and control of the natural person over the Business and their unlimited liability for the Business’ debts and other obligations. In such case the natural person trades in his own name instead of through a separate legal entity.

Business is defined as any economic activity, whether continuous or for a set period of time, conducted by any Person.15 It is implied in the definition that the activity is conducted with the intention of generating profits, and that some system and organisation exist for the activity conducted. However, a Business or Business Activity does not necessarily need to make a profit.

The definition includes any industrial, commercial, agricultural, vocational, professional or service activity, excavation activity and any other activity of an independent character related to the use of tangible and intangible property. This should be interpreted broadly to include any activity related to the development, sale, production, manufacturing, exploitation, marketing or distribution of physical and intangible properties.

The term “vocational” is to be interpreted as a skilled craft or trade, and “profession” is an occupation in which skill is applied to the affairs of others to meet their needs. Common examples of professional activities include accountancy, consulting, architecture, medical and legal services.

Whilst Business includes vocational, commercial, industrial and professional activities, it does not include employment, and Corporate Tax does not apply to a natural person’s salary, wages and other employment income. It also does not include income from Personal Investments and Real Estate Investments.16

In this regard, Personal Investments are activities that a natural person undertakes in their personal capacity and not through a Licence (or not required to be undertaken through a Licence), and the activities are not considered a commercial business under Federal Decree-Law No. 50 of 2022 issuing the Commercial Transactions Law.17

Real Estate Investments are activities undertaken by an individual in relation to the direct or indirect sale, lease, sub-lease and rental of land or real estate property in the UAE that are not conducted through a Licence (or are not required to be conducted through a Licence).18

Although a Business is typically carried on continuously and there is repetition of commercial activity, the definition allows for a short-term commercial activity to be considered a Business for Corporate Tax purposes.

For further details on taxable Business or Business Activities for natural Persons, readers are advised to consult Cabinet Decision No. 49 of 2023 on Specifying the Categories of Businesses or Business Activities Conducted by a Resident or Non- Resident Natural Person that are Subject to Corporate Tax

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