UAE Corporate Tax: Should freelancers wait to register?

ANYONE WITH ‘SELF-SOURCED INCOME’ IS BETTER OFF REGISTERING, EVEN WITHOUT DH1M THRESHOLD

Single individual owned-and-operated businesses — consultants, freelancers as well as independent property brokers — have another 12 months before they need to file for UAE corporate tax. However, there are a few crucial details they must address well in advance.

Recently, the UAE Ministry of Finance clarified the tax registration deadlines for businesses, including those operated by “natural persons”. While traditional businesses must register based on the licence date of their companies, natural persons have until March 31, 2025, to ensure full corporate tax compliance.

Single individual businesses fall under corporate tax regimes if their annual turnover exceeds Dh1 million.

But the most important point here is that any such individual with a business must still sign up for corporate tax registrations.

“If the individual has a ‘selfsourced income’, whether that’s Dh200,000 or Dh1 million, they are better off registering,” said a consultant. “Whether they file for corporate tax now or just before March 31, 2025 is entirely their choice.”

Self-employed property agents, consultants

Individuals based in the UAE who are currently employees but have their organisation’s approval to take on freelance projects of their own too should prep for corporate tax registration. For instance, if an individual moonlights as a property or IT consultant and generates income from that, it falls under the corporate tax framework.

“Licensed property agents who are not employed with any brokerage firm can take in income from a transaction,” said the consultant. “With commissions exceeding 5 per cent on a luxury home sale, the individual’s takeaway from any deal initiated by him can be substantial, [potentially falling] under the ambit of corporate tax registrations.”

‘Clarity’ on income

Girish Chand is senior partner at Dubai-based MCA Management Consultants. He says a natural person operated businesses’ strategy on corporate tax registration is entirely dependent on “clarity” of the income generated.

“In case of clear ‘business income’, they can go ahead and register at their convenience before year end,” said Chand. “The important element at this stage is to maintain segregation between what’s considered personal income — salary, investment income and real estate related income — and business related income.

“They need to track the business income and estimate whether it is likely to exceed Dh1 million for 2024. Also, proper accounting records need to be maintained, which can facilitate their return filing.”

The important element at this stage is to maintain segregation between what’s considered personal income — salary, investment income and real estate related income - and business related income.”

Girish Chand | Senior partner, MCA Management Consultants

It’s all in the turnover

Since the corporate tax mandate for “natural persons” with a business is based on revenues, they cannot afford not to register.

“Even individuals who have run up losses will have to register,” said Chand. “Also, they can carry forward the losses to be adjusted against future taxable profits [if that applies].”

The more disciplined ones are asking the questions now - and asking us to register.”

Wait to register? Or do it at the earliest?

Nasheeda, founder of Nishe Accounting & Consulting, advises not to delay registration if they are above the Dh1 million threshold since registration then is not a choice.

“The more disciplined ones are asking the questions now — and asking us to register,” she said. She highlights other concessions in the tax law, such as small business relief, carry forward of tax losses, and 0 per cent tax on profits below Dh375,000.

For UAE’s freelancers, independent tax consultants and real estate agents, it’s time to start on doing the sums. And decide when they should register for corporate tax…

Nasheeda | Founder of Nishe Accounting & Consulting