The corporate tax regulations refer to business or business activities in the UAE multiple times. You would have noticed us talking about it as well, so we decided to explain it properly once and for all. If there is business or business activity in the UAE, it will be taxed, even if it is conducted by a natural person, that is any individual living in the UAE.
Definition of a Business
The tax regulations define a business as any activity conducted regularly, on an ongoing and independent basis by any Person and in any location, such as industrial, commercial, agricultural, vocational professional, service or excavation activities, or any other activity related to the use of tangible or intangible properties.
Let us break up and understand this definition in a better manner.
1. Any activity - This is to ensure a broad set of activities can be included. Some of the examples of activities mentioned in the definition are industrial, commercial, agricultural, vocational professional, service or excavation activities, or any other activity related to the use of tangible or intangible properties. However, this does not include employment or personal investments.
2. Conducted regularly, on an ongoing - Refers to the fact that the same activity is repeated multiple times. This can be also on a short-term basis as well, so it can be conducted on a continuous basis or for a set period of time.
3. Independent basis - This activity is conducted on an independent basis.
4. By any person - This means any natural or juridical person.
5. In any location - This includes any place whether it may be within or outside UAE.
Definition of a Business Activity
The definition of business activity for corporate tax is broader and has been defined as any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of its Business.
Business activity for corporate tax purposes in UAE is clearly wider and simpler, let us break it up like the previous definition
1. Any transaction or activity, or series of transactions or series of activities - This is self-explanatory. This part of the definition is what makes it very broad, it includes transactions, step, or other activities done.
2. Conducted by a Person - This means it must be conducted by any natural or juridical person.
3. In the course of its Business - The above-discussed transaction(s) or activity(ies) must be conducted over the course of its business, this business is defined above.
A further Cabinet Decision also notes that the income of a natural person (Resident or Non-Resident) in the following activities will not be considered as business or business activities for corporate tax purposes -
1. Wages,
2. Personal Investment Income, and
3. Real Estate Investment Income
Additionally, a natural person will be subject to corporate tax if its business or business activities has an annual turnover of more than 1 Million AED.
