In the modern business world or post-Covid era, things are not as they were before. With an evolving world, there is a change in how business is conducted. There is a massive rise in the number of the number of remote entrepreneurs. This not only saves money but can also increase working efficiency in many cases. As a remote businessperson, you can conduct business in the UAE through digital communication. Therefore, there is a need to highlight the very aspect of corporate tax for remote entrepreneurs in the UAE. Nowadays, we see many businesses that operate on a remote basis. For instance, e-commerce is one of the most widely conducted off-shore businesses. In this blog, we are shedding light on the corporate tax aspects concerning remote entrepreneurs in the UAE.
Corporate Tax for Remote Entrepreneurs
When a natural person conducts business in the UAE, there is a probability that the person might be subject to corporate tax. However, certain conditions are available in further reading. First, we need to understand some basic stuff.
Who is a Remote Entrepreneur?
A remote entrepreneur is an individual who starts, manages, and runs a business from a location outside of a traditional office setting. Utilizing digital tools and online platforms, remote entrepreneurs engage in activities such as e-commerce, digital marketing, consulting, and other online-based business models. They often work from home, in co-working spaces, or while traveling, and rely on technology to communicate with clients, manage operations, and drive their business growth. This flexibility allows them to reach a global market and operate efficiently without the constraints of a physical office. This flexible work arrangement allows for greater work-life balance and can lead to increased productivity and efficiency.
Corporate Tax Considerations
The tax law states that corporate tax applies to taxable persons. A taxable person can either be a resident or a non-resident taxable person. As per Cabinet Decision No. 49 of 2023, businesses or business activities, conducted by a resident or non-resident natural person, shall be subject to corporate tax only where the total revenue derived from such businesses or business activities exceeds AED 1,000,000 (one million United Arab Emirates dirhams) within a Gregorian calendar year.
Activities that give rise to turnover from the following sources shall not be considered businesses or business activities. Therefore, these activities conducted by a resident or non-resident natural person are not subject to corporate tax. (Even if the amount of revenue is higher than 1 million AED.)
These businesses, or business activities, are:
- Wage.
- Personal investment income.
- Real estate investment income.
A natural person who is not conducting a business or business activities subject to corporate tax per this Cabinet Decision shall not be required to register for corporate tax.
Terms Explained:
Wage:
The employee receives a wage in consideration of their services under the employment contract, whether in cash or kind. This wage can be payable annually, monthly, weekly, daily, hourly, or piecemeal, and includes all allowances, bonuses, and any other benefits provided in the employment contract or under applicable state legislation.
Personal Investment:
A natural person conducts investment activity for their account without requiring a license from a licensing authority in the state. Furthermore, it is not a commercial business per Federal Decree-Law No. 50 of 2022.
Real Estate Investment:
A natural person conducts any investment activity related to the sale, leasing, sub-leasing, and renting of land or real estate property in the state without requiring a license from a licensing authority.
Conclusion:
In the evolving post-COVID business landscape, the rise of remote entrepreneurs has become a significant trend, offering cost savings and increased efficiency. Remote entrepreneurs leveraging digital tools to conduct business in the UAE must be aware of corporate tax implications. In the UAE, businesses or business activities of individuals generating over AED 1m annually are subject to corporate tax. However, there are exceptions for certain income types like wages, personal investments, and real estate investments. Understanding these tax considerations is crucial for remote entrepreneurs to ensure compliance and optimize their business operations in the UAE’s dynamic market. This blog provides a comprehensive overview to help remote entrepreneurs navigate the corporate tax landscape effectively.
Creative Zone Tax & Accounting:
At Creative Zone Tax & Accounting (CZTA), we specialize in guiding remote entrepreneurs through the complexities of the UAE’s corporate tax regulations. Our dedicated team of experts offers personalized accounting solutions and tax compliance services, ensuring your business runs smoothly and efficiently. Partner with CZTA for reliable, professional support that lets you focus on growing your business while we handle the rest. Your success is our mission.
