Self-employed professionals in the UAE earning over Dh1 million annually will be subject to UAE Corporate Tax. However, they are not required to establish a formal company structure for their operations.
Dubai: High-earning freelancers and self-employed professionals in the UAE who generate a turnover of Dh1 million or more (or are likely to do so) are not obligated to convert their operations into a company format in order to comply with corporate tax registration.
There were discussions suggesting that establishing a company structure would be advantageous for these self-employed individuals in the long run, particularly if their income and business growth potential indicated a likelihood of exceeding the Dh1 million revenue threshold per year.
Registration for individual taxpayers has not yet been opened, but it began for businesses starting from June 1, 2023.
Under the current regulations, self-employed individuals are only required to register with the tax authorities “if their turnover exceeds Dh1 million within the period from January 2024 to December 2024.” According to Rakesh Nair, Director of Corporate Tax at Crowe UAE, “The individual can register before the due date of filing returns, which is September 2025.” The UAE Corporate Law defines turnover as the calendar year (January to December), and any differentiation from this financial year will likely be rare.
If the turnover exceeds Dh1 million, the individual must file an income tax return within 9 months from the end of the taxable period.
Rakesh Nair, Crowe UAE
It is conceivable that highly popular social media influencers with a widespread Gulf/Middle East following, tech professionals specializing in high-demand areas such as AI services, and others may be running highly successful one-person operations, generating over Dh1 million in turnover and Dh375,000 in annual profit.
As for whether these professionals would benefit from incorporating as a company, Nair stated, “There is no requirement to upgrade into a full-scale business under the UAE Corporate Tax law unless mandated by any other law. If the turnover exceeds Dh1 million, an individual must file an income tax return within 9 months from the end of the taxable period” (which aligns with the September 2025 deadline for the first payment under the tax law).
Bookkeeping Requirements:
Like all businesses, self-employed professionals must maintain proper books of accounts.
Cash Basis Accounting:
If the turnover does not exceed Dh3 million under the corporate tax law, these self-employed professionals have the option to maintain accounts on a “cash basis” accounting method.
“Cash basis” accounting records revenues when the entity receives the cash and expenses when payments are made. This accounting method is typically used by individuals or micro-businesses that maintain inventory.
Single-Person Business Tax Obligations:
In late January, the UAE Ministry of Finance outlined the corporate tax obligations for single-person businesses. The tax rate, set at 9 percent, is only applicable if the income for the calendar year exceeds Dh375,000. Rental property income and personal investments are not covered by the corporate tax.
Please note that this rewritten news article is a summary based on the information provided and should not be considered as legal or financial advice.