I'm a freelancer earning AED 800,000 a year. Do I have to pay Corporate Tax?

NATURAL PERSON BASIC TAX INFORMATION BULLETIN 1. Who should read this information bulletin? 3. Which incomes of natural persons are subject to Corporate Tax? Any natural person (i.e. individual) who wants to understand: Only income derived from a Business or Business Activity conducted in the UAE by a natural person is subject to Corporate Tax and included in the Turnover threshold. - When are natural persons subject to UAE Corporate Tax? - Which incomes of natural persons are subject to Corporate Tax? - What is the Corporate Tax rate for natural persons? - What is the Tax Period under Corporate Tax Law for natural persons? - When are natural persons required to register for Corporate Tax purposes? - What are the other compliance requirements for natural persons under the Corporate Tax Law? 2. When are natural persons subject to UAE Corporate Tax? For a natural person, income from the following categories is not subject to Corporate Tax, and is not included in the Turnover threshold, regardless of the amount: - Wage is income which is given to the employee in consideration of their services under an employment contract, including any compensation or benefit received, whether in cash or in-kind. Thus, a salary or other form of remuneration received by a natural person as an employee from their employer is not subject to Corporate Tax. - Personal Investment income, including Dividends income, Interest income and gains or loss from sale of investments, is not subject to Corporate Tax when derived by natural persons from an investment activity conducted in their personal capacity that is neither conducted through a Licence or requiring a Licence from a Licensing Authority, nor considered a commercial business in accordance with the Commercial Transactions Law. - Real Estate Investment income is not subject to Corporate Tax when it is earned by a natural person from an investment activity related directly or indirectly to the selling, leasing, sub-leasing, and renting of land or real estate property in the UAE, which is not conducted, or not required to be conducted, through a Licence issued by a Licensing Authority in the UAE. Natural Persons are considered to be Taxable Persons under the Corporate Tax Law to the extent: - they are conducting a Business or Business Activity in the UAE, or - have a Permanent Establishment, or - derive State Sourced Income (i.e. income that is accrued in, or derived from, the UAE). However, a natural person is subject to Corporate Tax on their Business or Business Activities only where the total Turnover derived from their Business or Business Activities conducted in the UAE exceeds AED 1 million within a Gregorian calendar year that begins on or after 1 January 2024. If a natural person’s total Turnover from their Business or Business Activities conducted in the UAE does not exceed AED 1 million within a Gregorian calendar year, they do not have to register for, or pay, Corporate Tax on their income from the Business or Business Activities. Wage (employment income), Personal Investment income, and Real Estate Investment income derived by a natural person are out of scope of Corporate Tax and are not taken into account for the purpose of determining the AED 1 million Turnover threshold. 4. What is the Corporate Tax rate for natural persons? When the Turnover derived by a natural person from its Business and Business Activities in the UAE in a Gregorian calendar year exceeds AED 1 million, the Taxable Income of a natural person will be subject to Corporate Tax at the following rates: - 0% on the portion of the Taxable Income not exceeding AED 375,000; and - 9% on the portion of the Taxable Income that exceeds AED 375,000.

Article 2 – Income Subject to Corporate Tax at 0% (Zero Percent) 1. For the purposes of Paragraph (a) of Clause 1 of Article 3 of the Corporate Tax Law, the portion of Taxable Income of the Taxable Person not exceeding (375,000) three hundred seventy-five thousand dirhams shall be subject to Corporate Tax at the rate of (0%) zero percent in the Tax Period irrespective of whether the Taxable Person conducts multiple Businesses or Business Activity in that Tax Period. 2. Where it is established to the Authority that one or more Persons have artificially separated their Business or Business Activity and the Taxable Income across their entire Business or Business Activity was subject to Corporate Tax at (0%) zero percent in the Tax Period on an amount exceeding (375,000) three hundred seventy-five thousand dirhams, this would be considered an arrangement to obtain a benefit in relation to Corporate Tax under Clause 1 of Article 50 of the Corporate Tax Law. 3. For the purpose of verifying whether two or more Persons have artificially separated their Business or Business Activity, the Authority shall consider whether the arrangement was undertaken for a legitimate commercial purpose and Cabinet Decision No. 116 of 2022 - Unofficial Translation 2 whether the Persons substantially carry on the same Business or Business Activity taking into account all relevant facts and circumstances, including for example without limitation their financial, economic and regulatory ties.

Article 3 – Corporate Tax Rate 1. Corporate Tax shall be imposed on the Taxable Income at the following rates: a. 0% (zero percent) on the portion of the Taxable Income not exceeding the amount specified in a decision issued by the Cabinet at the suggestion of the Minister. b. 9% (nine percent) on Taxable Income that exceeds the amount specified in a decision issued by the Cabinet at the suggestion of the Minister. 2. Corporate Tax shall be imposed on a Qualifying Free Zone Person at the following rates: a. 0% (zero percent) on Qualifying Income. b. 9% (nine percent) on Taxable Income that is not Qualifying Income under Article 18 of this Decree-Law and any decision issued by the Cabinet at the suggestion 1 Definition added as per Federal Decree-Law No. 60 of 2023. 2 Definition added as per Federal Decree-Law No. 60 of 2023. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 8 of the Minister in respect thereof. 3. Without prejudice to the provisions of Clauses (1) and (2) of this Article, the Cabinet at the suggestion of the Minister shall issue a decision regulating all cases, provisions, conditions, rules, controls, and procedures for imposing the Top-up Tax on Multinational Enterprises and the exemptions therefrom, so that the total percentage of the effective tax imposed on them is (15%) fifteen percent. 3 Chapter Three – Exempt Person

3.11. Corporate Tax rate for natural persons The below rates apply to the total Taxable Income of a natural person, i.e. the Taxable Income derived from all Businesses or Business Activities conducted in the UAE by such natural person and not the Taxable Income of each Business or Business Activity separately. When the Turnover derived by the natural person in a Gregorian calendar year exceeds the AED 1 million, the Taxable Income of a natural person will be subject to Corporate Tax at the following rates:19 • 0% on the portion of the Taxable Income not exceeding AED 375,000. • 9% on the portion of the Taxable Income that exceeds AED 375,000. Example 17: Natural person receives a Wage and conducts Business in the UAE A natural person, Miss P, based in the UAE, conducted the following activities during a Gregorian calendar year: • Worked for 3 months under an employment contract and earned AED 200,000. • Worked as a freelance graphic designer in the UAE generating AED 1,600,000 Turnover (assume AED 400,000 of deductible expenses). • Ran a sole proprietorship that sold mobile phones and accessories in the UAE and overseas. The gross income from domestic sales amounted to AED 1,200,000, and AED 800,000 from overseas sales (assuming AED 1,400,000 of deductible expenses). Step 1 – Calculation of the Turnover The income derived from freelance activity, and from the sole proprietorship (both domestic and overseas sales, as the latter is related to the activity conducted in the UAE) are taken into consideration in computing the Turnover. Wage income is not considered. Therefore: Turnover = 1,600,000 + 1,200,000 + 800,000 = AED 3,600,000. As such, the natural person is considered to conduct Business or Business Activities that are subject to Corporate Tax, and the Corporate Tax is computed on the Taxable Income, which is the Accounting Income after the relevant required adjustments as per the Corporate Tax Law. 19 Article 3 of the Corporate Tax Law and Articles 2(1) and 3 of Cabinet Decision No. 116 of 2022. Corporate Tax Guide | Taxation of natural persons under the Corporate Tax Law | CTGTNP1 25