As the new year unfolds, freelancers and small businesses in the United Arab Emirates (UAE) are grappling with a significant shift in the tax landscape. The introduction of the UAE Corporate Tax Law (Federal-Decree Law No.47 of 2022) marks a pivotal change, effective for financial years starting from June 1, 2023. For the majority of UAE businesses, which typically adopt a financial year beginning on January 1, 2024, this signifies the commencement of the first taxable year under the new law.
For individual freelancers, the question of tax liability hinges on various factors. Generally, individuals earning income from employment, personal investments, and real estate investments would not be subject to tax in the UAE on such income. However, those engaged in business or business activities, including freelancers, would be subject to corporate tax on income generated within the UAE. This encompasses freelancing activities if the total turnover exceeds AED 1 million during a Gregorian calendar year.
The UAE has introduced small business relief to alleviate the tax burden on enterprises with annual revenues not exceeding AED 3 million. This relief mechanism, introduced last year by the Ministry of Finance, aims to support startups and small businesses with limited resources for tax compliance costs.
Janet Gooi, a UK and Malaysian qualified lawyer specializing in corporate tax, withholding tax, and VAT aspects across various industries, emphasizes the importance of proactive assessment by individuals, freelancers, and entrepreneurs regarding their income and tax position. This includes exploring small business relief where applicable. As the corporate tax regime in the UAE evolves, staying informed about developments and seeking professional advice becomes crucial for optimizing financial strategies and ensuring compliance with the new Corporate Tax Law.
Janet Gooi, recognized as a Rising Star Tax Practitioner in the UAE by the World Tax Rankings, brings a wealth of experience in international tax structuring, complex tax litigation, and the tax aspects of cross-border transactions.
The enactment of the UAE Corporate Tax Law underscores the need for a proactive approach to navigate the evolving tax landscape, ensuring individuals and businesses are well-informed and compliant with the latest regulations.