UAE Tax Simplified

May 23
What is a Resident Person? Understanding Corporate Tax in the UAE
Navigating tax laws can be tricky, especially when it comes to understanding who qualifies as a Resident Person for Corporate Tax purposes in the UAE. Let's break down what it means to be a Resident Person, whether you're an individual or a business, and see how this impacts your tax obligations.

Who is a Resident Person?
The definition of a Resident Person varies for individuals (Natural Persons) and businesses (Juridical Persons). Here's a simple explanation for both.

Natural Persons:
Natural Persons are individuals. You are considered a Resident Person for Corporate Tax if: You conduct a taxable business or business activity in the UAE. Your business generates a turnover above AED 1,000,000 within a Gregorian calendar year.
However, some types of income are excluded from this rule:

Wages: Your salary from employment is not subject to Corporate Tax.
Personal Investment Income: Income from personal investments is not taxed.
Real Estate Investment Income: Income from real estate investments is also excluded.

If your business activities generate more than AED 1,000,000 in turnover, you'll need to register for Corporate Tax. You might also qualify for Small Business Relief if you meet the necessary requirements.

Juridical Persons
Juridical Persons are entities with a separate legal personality from their owners, such as:
  • Limited Liability Companies (LLCs)
  • Private Shareholding Companies (PSCs)
  • Public Joint Stock Companies (PJSCs)

A Juridical Person is a Resident Person if:
  • It is incorporated, established, or recognized under UAE law.
  • It is incorporated outside the UAE but is "effectively managed and controlled" in the UAE.

"Effectively managed and controlled" means that key management and commercial decisions on strategic and policy matters are made in the UAE. This is different from day-to-day operational management.

Free Zone Persons are also Juridical Persons. They are Resident Persons for Corporate Tax purposes and may be eligible for Small Business Relief if their revenue is equal to or below AED 3,000,000.

However, Qualifying Free Zone Persons, who meet specific criteria, are not eligible for this relief.

Example
Imagine you are an individual running a small tech consultancy business in Dubai.

Here's how you can determine your status:
Turnover Calculation: Your consultancy generates AED 1,200,000 in turnover in a year.
Tax Obligations: Since your turnover exceeds the AED 1,000,000 threshold, you must register for Corporate Tax.
Income Exclusion: If part of your income comes from personal investments or real estate investments, that portion is not subject to Corporate Tax.

Now, let's consider a Juridical Person example:
Business Entity: You own a Limited Liability Company (LLC) in Abu Dhabi.

Incorporation: Your company is incorporated under UAE law.
Management: Key strategic decisions are made in the UAE.
Tax Status: Your company is a Resident Person and must comply with Corporate Tax laws.

If your LLC’s revenue is AED 2,800,000, it may qualify for Small Business Relief, simplifying your tax compliance.

Understanding whether you are a Resident Person is crucial for determining your tax obligations in the UAE. For individuals, it depends on your business activities and turnover. For businesses, it hinges on where the company is incorporated and managed. Always stay informed and consult with a tax advisor to ensure compliance and take advantage of available reliefs. Keep following our blog for more insights and updates on business regulations!
Created with