Understanding taxable persons and their role in UAE tax law is crucial for individuals and businesses operating within the United Arab Emirates. The concept of taxable persons forms the foundation of the UAE’s tax regime. Influencing various aspects of taxation, compliance, and reporting. Whether you are a resident, a business owner, or a professional working in the UAE. Grasping the essentials of taxable persons is essential to navigating the intricacies of the tax landscape effectively. We will delve into the definition of taxable persons, explore their significance in UAE tax law. And provide you with the knowledge you need to ensure compliance and make informed financial decisions. Get ready to gain a solid understanding of taxable persons in the UAE and unlock the key insights. That will help you navigate the world of taxation with confidence.
Taxable Persons:
Taxable persons refer to individuals or entities in the United Arab Emirates (UAE) who are liable to pay taxes. Whether you are a resident or non-resident. If you engage in taxable activities within the country, you are considered a taxable person. This includes various types of taxes such as income tax, value-added tax (VAT), corporate tax, and excise tax. Understanding your status as a taxable person is essential for meeting your tax obligations. And ensuring compliance with UAE tax laws.
The UAE Corporate Tax (‘CT’) has proposed to tax the income of all persons, except natural persons. Income earned by natural persons (individuals) shall not be subject to tax, except in certain circumstances.
Taxability of Natural Person:
The taxability of a natural person refers to the individual’s liability to pay taxes on their income. And assets based on the applicable tax laws and regulations. In the United Arab Emirates (UAE). The taxability of a natural person is determined by several factors. Including their residency status and the type of income they earn.
For UAE residents, the taxability of a natural person depends on their income sources. Currently, the UAE does not impose income tax on individuals’ salaries or personal income. However, certain types of income, such as rental income from properties or business profits. May be subject to taxation under specific circumstances.
Non-resident individuals, on the other hand, may be subject to tax on their UAE-sourced income. Depending on the relevant tax treaties and regulations.
It has been made clear that there is no intention to parallelly tax the income of the natural person. Therefore, employment income and other personal income earned by UAE residents. And foreign individuals will not be within the scope of the proposed UAE Corporate tax regime.
The treatment of income earned by Natural Persons (Individuals). Under the UAE Corporate Tax regime is summarized hereunder:
Tax regime is summarized hereunder:
| Salary and other employment income (whether received from the public or private sector). | CT Not Applicable. |
| Individual’s Business income earned under a commercial license. | CT Applicable. |
| The investment in real estate by individuals in their personal capacity. | CT is Not Applicable provided the individual is not required to obtain a commercial license or permit to do the activity. |
| Rental receipts from UAE real estate investments held in a personal capacity. | CT Not applicable. |
| Other Investment Income (investment held in a personal capacity). | CT Not applicable. |
| Dividends, capital gains, and other income earned from owning shares or other securities in their personal capacity. | CT Not Applicable. |
| Interest and other income earned by an individual from bank deposits or saving schemes. | CT Not Applicable. |
| Income earned by an Individual from activities carried out under a freelance license/permit. OR from an activity that requires a license/permit to perform such activity as per local laws. | CT Applicable. |
Taxability of Legal Persons:
The taxability of legal persons refers to the liability of corporate entities, partnerships. And other forms of business organizations to pay taxes on their income and activities. In the United Arab Emirates (UAE), legal persons are subject to various types of taxes. Including corporate tax and value-added tax (VAT), depending on their activities and the applicable regulations.
The corporate tax applies to companies and entities engaged in commercial activities. And the tax rate may vary depending on factors such as the company’s structure, industry, and profit levels. The UAE introduced the corporate tax in 2018. And certain exemptions and incentives may be available for specific sectors or free zones.
Additionally, legal persons in the UAE may also be subject to VAT. Which is a consumption tax imposed on the supply of goods and services. VAT is applicable to businesses with a certain turnover threshold. And they are required to register for VAT, charge VAT on eligible transactions, and file periodic VAT returns.
Understanding the taxability of legal persons is crucial for businesses operating in the UAE to ensure compliance with tax laws. Fulfill their tax obligations, and avoid penalties. It is recommended that businesses seek professional advice or consult tax authorities. To navigate the complexities of tax regulations specific to their industry and circumstances.
UAE Corporate Tax will apply to UAE companies and other legal persons incorporated in the UAE. As well as foreign legal entities that have a permanent establishment in the UAE or that earn UAE-sourced income.
The taxability of various Legal persons is summarized in the table hereunder:
| Type of legal entity | Taxability |
| Legal Person (Limited Liability Companies, Private Shareholding Companies. Public Joint Stock companies, and other entities that have separate legal entity) incorporated in the UAE. | CT Applicable. |
| Legal Person incorporated in the Foreign jurisdiction, but effectively managed and controlled in the UAE. | CT Applicable, as if UAE incorporated. |
| Limited liability partnership/partners limited by shares (where no partner has unlimited liability). | Treated as UAE Company – CT Applicable (Entity will be subject to tax and not the partners). |
| Limited and general partnership / other unincorporated joint ventures and AOP. | Treated as transparent entities – partners / members taxable. |
| Collective Investment funds that are structured as limited partnerships. | Treated as transparent entities – partners / members taxable. |
| Foreign unincorporated partnerships. | To follow the tax treatment of the respective foreign jurisdiction. |
Corporate Tax Services in UAE:
When it comes to corporate tax services in UAE. Tax agents in UAE play a crucial role in assisting businesses with their tax obligations and ensuring compliance with tax laws. At MASAR, we specialize in providing comprehensive tax services to companies operating in the UAE. Our experienced tax agents have in-depth knowledge of the local tax regulations. And can guide you through the complexities of corporate taxation. We offer a range of services, including tax planning, compliance, and filing of corporate tax returns. Our team will work closely with you to analyze your business structure, assess tax liabilities, identify available tax incentives. And develop strategies to optimize your tax position. With MASAR’s expertise and personalized approach. We can help you navigate the ever-changing tax landscape, minimize risks. And ensure that you meet your corporate tax obligations efficiently and effectively.
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