Dubai: While businesses in the UAE are working to meet their corporate tax registration deadlines, those into freelance consultation services, social media influencers, and single individual run businesses can take a more relaxed approach.
Because they have all the way up to end March 2025 before they need to register.
“For such individuals without a legal entity license, they need to register when their revenue exceeds Dh1 million during a calendar year,” said Girish Chand, Senior Partner at MCA Gulf. “If their income for 2024 exceeds Dh1 million, they are expected to register with FTA by March 31, 2025.
“Since the due date is in March 2025, there is no urgent need to register for corporate tax for individuals and freelancers.”
And for those freelancers generating less than Dh1 million, they don’t have to register at all.
“The tax requirements on freelancers are quite lenient,” said Sumayya Zain, Managing Partner at Hallmark International Auditing of Accounts.
“If the person's annual turnover exceeds Dh1 million but remains under Dh3 million, they can even be eligible for the UAE’s Small Business Relief program. But provided they maintain proper accounting records.
“This would mean they are treated as not having derived any taxable income for the relevant tax period.”
According to Chand, whether the freelancer needs to register or not also depends on the license. “If it is as a ‘natural person’, the limit of Dh1 million will apply,” he said. “But If the individual establishes a company as a 'juridicial person', the Dh1 million threshold does not apply as there is no registration threshold for such a legal entity.”
The requirement for mandatory annual audits is for companies with turnover over Dh50m, or qualifying free zone entities. Individuals having relevant turnover below Dh1m would be expected to maintain proof of turnover as they are currently not required to register for CT.
A thriving freelancer economy
During these last three years, there has been a significant increase in the number of freelancer operators based in the UAE or coming here for project work. Contracts related to technology and project management have typically made full use of their services, and engaged at substantial values too. In the coming months, AI-related work too should see inputs being sources from freelance specialists.
Then there are the legions of influencers, some of whom generate substantial income for the generated content from brand endorsements.
This is a similar strategy to what’s been provided for small businesses operating in the country, of which the 3-year relief from tax (until end 2026) if certain conditions are met remains the most notable.
The UAE corporate tax regime provisions for individuals offering freelance services thus offers flexibility where possible.
Individuals based in the UAE who generate revenue through various social media platforms must register for corporate tax if their earnings exceed Dh1 million.
For instance, assume a freelancer based in the UAE provides consultancy to a third-party company based outside of the UAE and gets paid Dh1.5 million within a calendar year. “After setting off their deductible costs, if the net profit is Dh1.1 million, the freelancer is liable to register and pay corporate tax,” said Sumayya. “However, he or she will still be able to benefit from the 0 per cent rate on the first Dh375,000 of taxable Income.” (Or opt for Small Business Relief.)
Outside freelancers getting contracts in UAE
When it comes to freelancers from outside the UAE securing local contracts and this turnover is above Dh1 million, ‘they would be treated as resident in UAE and required to be registered under corporate tax,” said Chand. “However, if they are in a country where UAE has a double taxation agreement, then that agreement would decide the residency status and, consequently, the tax treatment for the freelancer’s UAE income.”
Should freelancers use 'cash basis of accounting'?
- A cash basis of accounting means recording transactions only when cash is received or paid for the service rendered. If the freelancer has raised an invoice but money was not received during the year, they will not have to pay a tax on it.
- As opposed to that, there is the accrual accounting, where if one raises an invoice, it is considered as income and tax has to be paid even if the money hasn't been received.
