Is the AED 1 million threshold for individuals based on revenue or profit?

have been correctly dealt with or not. 3.5. What income is considered taxable for natural persons? Only income derived from a Business or Business Activity conducted in the UAE by a natural person is subject to Corporate Tax. However, if a natural person’s total Turnover from 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. The Turnover may include “in-kind” payments which are valued at Market Value. For Corporate Tax purposes, Wage (employment income), Personal Investment income, and Real Estate Investment income derived by a natural person are out of scope of Corporate Tax and not taken into account for the purpose of determining the AED 1 million threshold. Example 3: A natural person providing consultancy services (self-employed) A natural person, Mrs. A, based in the UAE, provides consultancy services to a third-party company based outside the UAE and gets paid AED 1,200,000 for these services within a Gregorian calendar year. After setting off their deductible costs, her net profit is AED 900,000. Mrs. A works for herself, and is not employed by the foreign company, so the income derived is not in the nature of a Wage. The income also does not have the nature of Personal Investment income or Real Estate Investment income. In this case, the income from the consultancy services is that of a Business or Business Activity. As the Turnover exceeds AED 1 million, Mrs. A’s income from the consultancy services is subject to Corporate Tax. Assuming that all costs are deductible for Corporate Tax purposes, Mrs. A’s Taxable Income is AED 900,000. Note there is no exemption for the profit relating to the first AED 1 million of Turnover. However, the Mrs. A will be able to benefit from the 0% rate on the first AED 375,000 of Taxable Income. In addition, as the Revenue (AED 1,200,000) of the Mrs. A does not exceed AED 3 million and assuming that the Revenue for previous Tax Periods also does not exceed AED 3 million, she can elect for Small Business Relief. This would mean she is treated as not having derived any Taxable Income for the relevant Tax Period Corporate Tax Guide | Taxation of natural persons under the Corporate Tax Law | CTGTNP1 14

A A natural person who operates a Business with a trade licence will need to register for Corporate Tax if the revenue from the Business exceeds AED 1 million in a calendar year to 31 December118. Financial Statements Q Can a Taxable Person calculate their Taxable Income based on financial statements prepared according to foreign accounting standards? A No, for Corporate Tax purposes, Taxable Income for a Tax Period must be based on financial statements for the period prepared according to IFRS, IFRS for SMEs (if revenue is AED 50 million or less) or cash basis (optional if revenue is AED 3 million or less)119. Q Can the requirement for financial statements to be audited120 be satisfied by an overseas auditor? A No, where the Corporate Tax Law requires audited financial statements, the auditor must be a UAE auditor registered with the UAE Ministry of Economy, who is a Chartered Accountant or accounting firm practising an auditing or accounting profession within the UAE. Q In the case of an investment business, is the AED 50 million minimum revenue threshold 121 for audited financial statements based on gross or net revenue? A The threshold follows the accounting treatment under IFRS and is based on the revenue recorded in the financial statements. For trades in securities and investments, the threshold is based on the total of the gains from the sale of the investments/securities. The gains are calculated in accordance with IFRS 9 as the gross proceeds less the cost of the investments/securities, (where the gross proceeds are higher than the cost of the investments/securities). Any losses (where the gross proceeds are lower than the cost of the investments/securities) are disregarded because they are not included as income in the statement of profit or loss. Tax Period Q If a natural person prepares financial statements to 31 March each year, will their Tax Period also be the year ending on 31 March? A No, a natural person can only have a Tax Period ending on 31 December. A natural person is subject to Corporate Tax only where the business revenue exceeds AED 1,000,000 within a Gregorian calendar year to 31 December122. Accordingly, assessing whether the natural person is subject to Corporate Tax must be determined on a per calendar year basis and the Tax Period of a natural person is the Gregorian calendar year to 31 December. Transitional Relief Q Can an election for transitional relief123 in respect of Qualifying Immovable Property be made for property classified as inventory under IFRS accounting standards? 118 Cabinet Decision No. 49 of 2023 119 Article 20(1) of the Corporate Tax Law and Ministerial Decision No. 114 of 2023 120 Article 54(2) of the Corporate Tax Law and Ministerial Decision No. 84 of 2025 121 Article 54(2) of the Corporate Tax Law and Ministerial Decision No. 84 of 2025 122 Article 2(1) of Cabinet Decision No. 49 of 2023 123 Article 61(1) of the Corporate Tax Law and Article 2 of Ministerial Decision No. 120 of 2023 124 Article 61(1) of the Corporate Tax Law and Article 2 of Ministerial Decision No. 120 of 2023 19