Manali Chopra, Director - Audit, Accounting & Tax, AKW Consultants

The recent enactment of the Corporate Tax Law has ignited conversations, particularly regarding its implications for Natural Persons. While the initial iterations contained a level of ambiguity, the Federal Tax Authority (FTA) has issued an extensive and detailed guide outlining the taxability of Natural Persons in the UAE that have clarified various aspects of the law.

Corporate Tax in the UAE only applies to Natural Persons engaged in business activities whose annual gross turnover surpasses Dh1 million in a calendar year. The guide also delves into the treatment of Natural Persons and sole proprietorships and states that they will be treated as one and the same for tax purposes, providing examples to elucidate the categorisation of income from various sources under the law.

The guide also references Small Business Relief and states that Natural Persons meeting specific criteria can avail themselves of Small Business Relief if their gross turnover remains below Dh3 million. However, compliance requirements become applicable once turnover exceeds Dh1 million.

Transfer pricing principles were another crucial aspect for which businesses led by Natural Persons — especially in relation to Related Parties — required clarification. The guide underscores that Connected Persons provisions exclusively pertain to the taxpayer making the payment, not the recipient.

Maintaining registration status for Corporate Tax is imperative for Natural Persons, even if turnover falls below Dh1 million. Deregistration is only permissible when all business activities come to a complete halt. In essence, as the UAE adapts to these changes, individuals involved in business activities must stay informed and seek professional guidance to ensure compliance and seamless operations in the evolving business landscape. Understanding the intricacies of Corporate Tax provisions is crucial for pre-empting potential challenges.